PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
Selected financial data
The following tables present AerCap Holdings N.V.'s selected consolidated financial data for each of the periods indicated, prepared in
accordance with U.S. GAAP. This information should be read in conjunction with AerCap Holdings N.V.'s audited Consolidated Financial Statements and related notes and "Item 5.
Operating and Financial Review and Prospects." The financial information presented as of December 31, 2017 and 2016 and for the years ended December 31, 2017, 2016 and 2015 was derived
from AerCap Holdings N.V.'s audited Consolidated Financial Statements included in this annual report. The financial information presented as of December 31, 2015, 2014 and 2013 and for
the years ended December 31, 2014 and 2013 was derived from AerCap Holdings N.V's. audited Consolidated Financial Statements not included in this annual report.
5
Table of Contents
Consolidated Balance Sheet Data
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As of December 31,
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2017
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2016
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2015
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2014
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2013
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(U.S. Dollars in thousands)
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Assets
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Cash and cash equivalents
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$
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1,659,669
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$
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2,035,447
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$
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2,403,098
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$
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1,490,369
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$
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295,514
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Restricted cash
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364,456
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329,180
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419,447
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717,388
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272,787
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Flight equipment held for operating leases, net
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32,396,827
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31,501,973
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32,219,494
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31,984,668
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8,085,947
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Maintenance rights intangible and lease premium, net
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1,501,858
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2,167,925
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3,139,045
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3,906,026
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9,354
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Prepayments on flight equipment
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2,930,303
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3,265,979
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3,300,426
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3,486,514
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223,815
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Other assets
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3,187,031
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2,319,949
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2,267,989
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2,134,928
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451,825
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Total Assets
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$
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42,040,144
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$
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41,620,453
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$
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43,749,499
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$
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43,719,893
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$
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9,339,242
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Liabilities and Equity
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Debt
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28,420,739
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27,716,999
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29,641,863
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30,254,905
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6,124,993
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Other liabilities
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4,980,591
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5,321,190
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5,681,827
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5,522,440
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785,017
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Total Liabilities
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33,401,330
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33,038,189
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35,323,690
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35,777,345
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6,910,010
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Total AerCap Holdings N.V. shareholders' equity
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8,579,710
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8,524,447
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8,348,963
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7,863,777
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2,425,372
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Non-controlling interest
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59,104
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57,817
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76,846
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|
78,771
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3,860
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Total Equity
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8,638,814
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8,582,264
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8,425,809
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7,942,548
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2,429,232
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Total Liabilities and Equity
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$
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42,040,144
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$
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41,620,453
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$
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43,749,499
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$
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43,719,893
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$
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9,339,242
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6
Table of Contents
Consolidated Income Statement Data
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Year Ended December 31,
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2017
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2016
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2015
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2014
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2013
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(U.S. Dollars in thousands, except share and per share data)
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Revenues and other income
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Lease revenue
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$
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4,713,802
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$
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4,867,623
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$
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4,991,551
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$
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3,449,571
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$
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976,147
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Net gain on sale of assets
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229,093
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138,522
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183,328
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37,497
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41,873
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Other income
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94,598
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145,986
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112,676
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104,491
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32,046
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Total Revenues and other income
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5,037,493
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5,152,131
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5,287,555
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3,591,559
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1,050,066
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Expenses
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Depreciation and amortization
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1,727,296
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1,791,336
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1,843,003
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1,282,228
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337,730
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Asset impairment
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61,286
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81,607
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16,335
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21,828
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26,155
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Interest expense
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1,112,391
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1,091,861
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1,099,884
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780,349
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226,329
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Other operating expenses
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537,752
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582,530
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522,413
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141,572
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49,023
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Transaction, integration and restructuring related expenses
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14,605
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53,389
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58,913
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148,792
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10,959
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Selling, general and administrative expenses
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348,291
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351,012
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381,308
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299,892
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89,079
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Total Expenses
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3,801,621
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3,951,735
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3,921,856
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2,674,661
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739,275
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Income before income taxes and income of investments accounted for under the equity method
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1,235,872
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1,200,396
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1,365,699
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916,898
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310,791
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Provision for income taxes
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(164,718
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)
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(173,496
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)
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(189,805
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)
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(137,373
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)
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(26,026
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)
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Equity in net earnings of investments accounted for under the equity method
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9,199
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12,616
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1,278
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28,973
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10,637
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Net income
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$
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1,080,353
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$
|
1,039,516
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$
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1,177,172
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$
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808,498
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$
|
295,402
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Net (income) loss attributable to non-controlling interest
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|
(4,202
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)
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|
7,114
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|
|
1,558
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|
|
1,949
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(2,992
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)
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Net income attributable to AerCap Holdings N.V.
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$
|
1,076,151
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$
|
1,046,630
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$
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1,178,730
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$
|
810,447
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$
|
292,410
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Basic earnings per share
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$
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6.68
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$
|
5.64
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$
|
5.78
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$
|
4.61
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|
$
|
2.58
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Diluted earnings per share
|
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$
|
6.43
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|
|
$
|
5.52
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|
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$
|
5.72
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$
|
4.54
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$
|
2.54
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7
Table of Contents
RISK FACTORS
Risks related to our business
We require significant capital to fund our business.
As of December 31, 2017, we had 438 new aircraft on order, which will require substantial aircraft purchase contract payments. In order
to meet these commitments and to maintain an adequate level of unrestricted cash, we will need to raise additional funds by accessing committed debt facilities, securing additional financing from
banks or through capital markets transactions, or possibly by selling aircraft. Our typical sources of funding may not be sufficient to meet our liquidity needs, in which case we may be required to
raise capital from new sources, including by issuing new types of debt, equity or hybrid securities.The issuance of additional equity may be dilutive to existing shareholders or otherwise may be on
terms not favorable to us or existing shareholders.
If
we are unable to meet our aircraft purchase commitments as they come due, we will be subject to several risks, including:
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forfeiting deposits and progress payments to manufacturers and having to pay certain significant costs related to these commitments such as
actual damages and legal, accounting and financial advisory expenses;
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-
defaulting on our lease commitments, which could result in monetary damages and strained relationships with lessees;
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-
failing to realize the benefits of purchasing and leasing such aircraft; and
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risking harm to our business reputation, which would make it more difficult to purchase and lease aircraft in the future on agreeable terms, if
at all.
Any
of these events could materially and adversely affect our financial results.
To service our debt and meet our other cash needs, we will require a significant amount of cash, which may
not be available.
Our ability to make payments on, or repay or refinance, our debt, will depend largely upon our future operating performance. Our future
performance, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow
funds in the future to make payments on our debt will depend on our maintaining specified financial ratios and satisfying financial condition tests and other covenants in the agreements governing our
debt. Our business may not generate sufficient cash flow from operations and future borrowings may not be available in amounts sufficient to pay our debt and to satisfy our other liquidity needs.
If
our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to seek alternatives, such as to reduce or delay investments and aircraft
purchases, or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our debt will depend on the condition of the capital markets
and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and might require us to comply with more onerous covenants, which could further restrict our
business operations. The terms of our debt instruments may restrict us from adopting some of these alternatives. These alternative measures may not be successful and may not permit us to meet our
scheduled debt service obligations or to meet our aircraft purchase commitments as they come due.
8
Table of Contents
Despite our substantial indebtedness, we might incur significantly more debt.
Despite our current indebtedness levels, we expect to incur additional debt in the future to finance our operations, including purchasing
aircraft and meeting our contractual obligations. The agreements relating to our debt, including our indentures, term loan facilities, ECA guaranteed financings, revolving credit facilities,
securitizations, and other financings do not prohibit us from incurring additional debt. As of December 31, 2017, we had approximately $6.7 billion of undrawn lines of credit available
under our credit and term loan facilities, subject to certain conditions, including compliance with certain financial covenants. If we increase our total indebtedness, our debt service obligations
will increase, and we will become more exposed to the risks arising from our substantial level of indebtedness.
Our level of indebtedness, which requires significant debt service payments, could adversely impact our
operating flexibility and financial results.
The principal amount of our outstanding indebtedness, which excludes fair value adjustments of $0.3 billion and debt issuance costs and
debt discounts of $0.2 billion, was approximately $28.3 billion as of December 31, 2017 (approximately 67% of our total assets as of December 31, 2017), and our interest
payments were $1.2 billion for the year ended December 31, 2017. Due to the capital-intensive nature of our business, we expect that we will incur additional indebtedness in the future
and continue to maintain significant levels of indebtedness.
Our
level of indebtedness:
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requires a substantial portion of our cash flows from operations to be dedicated to interest and principal payments and therefore not available
to fund our operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other purposes;
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restricts the ability of some of our subsidiaries and joint ventures to make distributions to us;
-
-
may impair our ability to obtain additional financing on favorable terms or at all in the future;
-
-
may limit our flexibility in planning for, or reacting to, changes in our business and industry; and
-
-
may make us more vulnerable to downturns in our business, our industry or the economy in general.
An increase in our cost of borrowing or changes in interest rates may adversely affect our net income.
We use a mix of fixed rate and floating rate debt to finance our business. Any increase in our cost of borrowing directly impacts our net
income. Our cost of borrowing is affected primarily by the market's assessment of our credit risk and fluctuations in interest rates and general market conditions. Interest rates that we obtain on our
debt financings can fluctuate based on, among other things, changes in views of our credit risk, fluctuations in U.S. Treasury rates and LIBOR rates, as applicable, changes in credit spreads and swap
spreads, and the duration of the debt being issued. Increased interest rates prevailing in the market at the time of our incurrence of new debt will also increase our interest expense. If interest
rates increase, we will be obligated to make higher interest payments to the lenders of our floating rate debt to the extent that it is not hedged. Please refer to
"Item 11Quantitative and Qualitative Disclosures About Market RiskInterest rate risk" for further details on our interest rate risk. In addition, we are exposed to the
credit risk that the counterparties to our derivative contracts will default on their obligations.
Moreover,
if interest rates were to rise sharply, we would not be able to fully offset immediately the negative impact on our net income by increasing lease rates, even if the market
were able to bear the increased lease rates. Our leases are generally for multiple years with fixed lease rates over the life of the lease and, therefore, lags will exist because our lease rates with
respect to a particular aircraft cannot generally be increased until the expiration of the lease.
9
Table of Contents
Decreases
in interest rates may also adversely affect our interest revenue on cash deposits as well as lease revenue generated from leases with lease rates tied to floating interest
rates. During the year ended December 31, 2017, approximately 4.9% of our basic lease rents from aircraft under operating leases was derived from such leases. Therefore, if interest rates were
to decrease, our lease revenue would decrease. In addition, since our fixed rate leases are based, in part, on prevailing interest rates at the time we enter into the lease, if interest rates
decrease, new fixed rate leases we enter into may be at lower lease rates than if no interest rate decrease had occurred and our lease revenue will be adversely affected.
Negative changes in our credit ratings may limit our ability to obtain financing or increase our borrowing
costs, which could adversely impact our financial results.
We are currently subject to periodic review by independent credit rating agencies S&P, Moody's and Fitch, each of which currently maintains an
investment grade rating with respect to us. Our ability to obtain secured or unsecured debt financing and our cost of secured or unsecured debt financing is dependent, in part, on our credit ratings.
Maintaining our credit ratings depends in part on strong financial results and in part on other factors, including the outlook of the rating agencies on our sector and on the market generally. A
credit rating downgrade could negatively impact our ability to obtain secured or unsecured financing and increase our borrowing costs.
We
cannot assure you that these credit ratings will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn. Ratings are not a
recommendation to buy, sell or hold any security, and each agency's rating should be evaluated independently of any other agency's rating. Actual or anticipated changes or downgrades in our credit
ratings, including any announcement that our ratings are under review for a downgrade, could increase our corporate borrowing costs and limit our access to the capital markets, which could adversely
impact our financial results.
The agreements governing our debt contain various covenants that impose restrictions on us that may affect
our ability to operate our business.
Certain of our indentures, term loan facilities, ECA guaranteed financings, revolving credit facilities, securitizations, other commercial bank
financings, and other agreements
governing our debt impose operating and financial restrictions on our activities that limit or prohibit our ability to, among other things:
-
-
incur additional indebtedness;
-
-
create liens on assets;
-
-
sell certain assets;
-
-
make certain investments, loans, guarantees or advances;
-
-
declare or pay certain dividends and distributions;
-
-
make certain acquisitions;
-
-
consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
-
-
enter into transactions with our affiliates;
-
-
change the business conducted by the borrowers and their respective subsidiaries;
-
-
enter into a securitization transaction unless certain conditions are met; and
-
-
access cash in restricted bank accounts.
10
Table of Contents
The
agreements governing certain of our indebtedness also contain financial covenants, including requirements that we comply with certain loan-to-value, interest coverage and leverage
ratios. These restrictions could impede our ability to operate our business by, among other things, limiting our ability to take advantage of financing, merger and acquisition and other corporate
opportunities.
Various
risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. Failure to comply with
any of the covenants in our financing agreements would result in a default under those agreements and could result in a default under other agreements containing cross default provisions. Under these
circumstances, we may have insufficient funds or other resources to satisfy all our obligations.
We may be unable to generate sufficient returns on our aircraft investments.
Our results depend on our ability to consistently acquire strategically attractive aircraft, continually and profitably lease and re-lease them,
and finally sell or otherwise dispose of them, in order to generate returns on the investments we have made, provide cash to finance our growth and operations, and service our existing debt. Upon
acquiring new aircraft we may not be able to enter into leases that generate sufficient cash flow to justify the cost of purchase. When our leases
expire or our aircraft are returned prior to the date contemplated in the lease, we bear the risk of re-leasing, selling or parting-out the aircraft. Because our leases are predominantly operating
leases, only a portion of an aircraft's value is recovered by the revenues generated from the lease and we may not be able to realize the aircraft's residual value after lease expiration.
Our
ability to profitably purchase, lease, re-lease, sell or otherwise dispose of our aircraft will depend on conditions in the airline industry and general market and competitive
conditions at the time of purchase, lease, and disposition. In addition to factors linked to the aviation industry in general, other factors that may affect our ability to generate adequate returns
from our aircraft include the maintenance and operating history of the airframe and engines, the number of operators using the particular type of aircraft, and aircraft age.
Customer demand for certain types of our aircraft may decline.
Aircraft are long-lived assets and demand for a particular model and type of aircraft can change over time. Demand may decline for a variety of
reasons, including obsolescence following the introduction of newer technologies, market saturation due to increased production rates, technical problems associated with a particular model, new
manufacturers entering the marketplace or existing manufacturers entering new market segments, additional governmental regulation such as environmental rules or aircraft age limitations, or the
overall health of the airline industry.
11
Table of Contents
The
supply and demand for aircraft is affected by various factors that are outside of our control, including:
-
-
passenger and air cargo demand;
-
-
fuel costs, inflation and general economic conditions;
-
-
geopolitical events, including war, prolonged armed conflict and acts of terrorism;
-
-
epidemics and natural disasters;
-
-
governmental regulation, including regulation of trade, such as the imposition of import and export controls, tariffs and other trade barriers;
-
-
interest rates;
-
-
the availability and cost of financing;
-
-
airline restructurings and bankruptcies;
-
-
manufacturer production levels and technological innovation;
-
-
manufacturers merging, entering or exiting the industry;
-
-
retirement and obsolescence of aircraft models;
-
-
increases in production rates from manufacturers;
-
-
reintroduction into service of aircraft previously in storage; and
-
-
airport and air traffic control infrastructure constraints.
Over
recent years, the airline industry has committed to a significant number of aircraft deliveries through order placements with manufacturers, and in response, aircraft manufacturers
have raised their production output. The increase in these production levels could result in an oversupply of relatively new aircraft if growth in airline traffic does not meet airline industry
expectations.
In
addition, recent and future political developments, including developments as a result of the policies of the current U.S. presidential administration or policies pursued in Europe,
could result in increased regulation of trade, which could adversely impact demand for aircraft.
As
demand for particular aircraft declines as a result of any of these factors, lease rates for that type of aircraft are likely to correspondingly decline, the residual values of that
type of aircraft could be negatively impacted, and we may be unable to lease such aircraft on favorable terms, if at all. In addition, the risks associated with a decline in demand for a particular
aircraft model or type increase if we acquire a high concentration of such aircraft. For example, as of December 31, 2017, we had 438 new aircraft on order, including 222 Airbus A320neo Family
aircraft, 104 Boeing 737MAX aircraft, 53 Boeing 787 aircraft, 50 Embraer E-Jets E2 aircraft, and nine Airbus A350 aircraft. If demand declines for a model or type of aircraft of which we
own or will acquire a relatively high concentration, it could materially and adversely affect our financial results.
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The value and lease rates of our aircraft could decline.
Aircraft values and lease rates have occasionally experienced sharp decreases due to a number of factors, including, but not limited to,
decreases in passenger air travel and air cargo demand, changes in fuel costs, inflation, government regulation and changes in interest rates. In addition to factors linked to the aviation industry
generally, many other factors may affect the value and lease rates of our aircraft, including:
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the particular maintenance, operating history and documentary records of the aircraft;
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the geographical area where the aircraft is based and operates;
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the number of operators using a particular type of aircraft;
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the regulatory authority under which the aircraft is operated;
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whether the aircraft is subject to a lease and, if so, whether the lease terms are favorable to the lessor;
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the age of the aircraft;
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any renegotiation of a lease on less favorable terms;
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the negotiability of clear title free from mechanic's liens and encumbrances;
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any regulatory and legal requirements that must be satisfied before the aircraft can be purchased, sold or re-leased;
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decrease in the creditworthiness of lessees;
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compatibility of aircraft configurations or specifications with other aircraft owned by operators of that type;
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comparative value based on newly manufactured competitive aircraft; and
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the availability of spare parts.
Any
decrease in the value or lease rates of our aircraft that results from the above factors or other factors may have a material adverse effect on our financial results.
Strong competition from other aircraft lessors could adversely affect our financial results.
The aircraft leasing industry is highly competitive. Our competition is primarily comprised of major aircraft leasing companies, but we may also
encounter competition from other entities such as:
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airlines;
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aircraft manufacturers;
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financial institutions, including those seeking to dispose of repossessed aircraft at distressed prices;
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aircraft brokers;
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public and private partnerships, investors and funds with excess capital to invest in aircraft and engines; and
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emerging aircraft leasing companies that we do not currently consider our major competitors.
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Some
of these competitors may have greater operating and financial resources than we do. We may not always be able to compete successfully with such competitors and other entities, which
could materially and adversely affect our financial results.
Our financial condition is dependent, in part, on the financial strength of our lessees.
Our financial condition depends on the ability of lessees to perform their payment and other obligations to us under our leases. We generate the
primary portion of our revenue from leases to the aviation industry, and as a result we are indirectly affected by all the risks facing airlines today. The ability of our lessees to perform their
obligations depends primarily on their financial condition and cash flows, which may be affected by factors outside our control, including:
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passenger air travel and air cargo demand;
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competition;
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economic conditions, inflation and currency fluctuations in the countries and regions in which a lessee operates;
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price and availability of jet fuel;
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availability and cost of financing;
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fare levels;
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geopolitical and other events, including war, acts of terrorism, outbreaks of epidemic diseases and natural disasters;
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increases in operating costs, including labor costs and other general economic conditions affecting our lessees' operations;
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labor difficulties;
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the availability of financial or other governmental support extended to a lessee; and
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governmental regulation and associated fees affecting the air transportation business, including restrictions on carbon emissions and other
environmental regulations, and fly-over restrictions imposed by route authorities.
Generally,
airlines with high financial leverage are more likely than airlines with stronger balance sheets to be affected, and affected more quickly, by the factors listed above. Such
airlines are also more likely to seek operating leases.
Any
downturns in the aviation industry could greatly exacerbate the weakened financial condition and liquidity problems of some of our lessees and further increase the risk that they
will delay, reduce or fail to make rental payments when due. At any point in time, our lessees may be significantly in arrears. Some lessees encountering financial difficulties may seek a reduction in
their lease rates or other concessions, such as a decrease in their contribution toward maintenance obligations. Moreover, we may not correctly assess the credit risk of each lessee or charge lease
rates that incorrectly reflect related risks. Many of our lessees are not rated investment grade by the principal U.S. rating agencies and may be more likely to suffer liquidity problems than those
that are so rated.
If
lessees of a significant number of our aircraft fail to perform their obligations to us, our financial results and cash flows will be materially and adversely affected.
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A return to historically high fuel prices or continued volatility in fuel prices could affect the
profitability of the aviation industry and our lessees' ability to meet their lease payment obligations to us.
Historically, fuel prices have fluctuated widely depending primarily on international market conditions, geopolitical and environmental events
and currency exchange rates. Factors such as natural disasters can also significantly affect fuel availability and prices. The cost of fuel represents a major expense to airlines that is not within
their control, and significant increases in fuel costs or hedges that inaccurately assess the direction of fuel costs can materially and adversely affect their operating results. Due to the
competitive nature of the aviation industry, operators may be unable to pass on increases in fuel prices to their customers by increasing fares in a manner that fully offsets the increased fuel costs
they may incur. In addition, they may not be able to manage this risk by appropriately hedging their exposure to fuel price fluctuations. The profitability and liquidity of those airlines that do
hedge their fuel costs can also be adversely affected by swift movements in fuel prices, if such airlines are required as a result to post cash collateral under hedge agreements. Therefore, if for any
reason fuel prices return to historically high levels or show significant volatility, our lessees are likely to incur higher costs or generate lower revenues, which may affect their ability to meet
their obligations to us.
Interruptions in the capital markets could impair our lessees' ability to finance their operations, which
could prevent the lessees from complying with payment obligations to us.
The global financial markets can be highly volatile and the availability of credit from financial markets and financial institutions can vary
substantially depending on developments in the global financial markets. Many of our lessees have expanded their airline operations through borrowings and are leveraged. These lessees will depend on
banks and the capital markets to provide working capital and to refinance existing indebtedness. To the extent such funding is unavailable, or available only at high interest costs or on unfavorable
terms, and to the extent financial markets do not provide equity financing as an alternative, our lessees' operations and operating results may be materially and adversely affected and they may not
comply with their respective payment obligations to us.
A sovereign debt crisis could result in higher borrowing costs and more limited availability of credit, as
well as impact the overall airline industry and the financial health of our lessees.
In recent years, the European Union (the "EU") has faced both financial and political turmoil which, if it continues or worsens, could have a
material adverse effect on our business. For example, following the global financial crisis of 2008, several countries in Europe faced a sovereign debt crisis (commonly referred to as the "European
Debt Crisis") that negatively affected economic activity in that region and adversely affected the strength of the euro versus the U.S. dollar and other currencies. Although some of these countries
are no longer facing a serious debt crisis, the lingering effects of the European Debt Crisis are unclear and may have a material adverse effect on our business, particularly if any European countries
face sovereign debt default. Furthermore, concerns exist regarding the sovereign debt of certain Latin American countries, including Venezuela. If Venezuela or any other country faces a sovereign debt
crisis, it could adversely affect the global banking system, due to its exposure to the sovereign debt and the imposition of stricter capital requirements. A sovereign debt crisis may also lower
consumer confidence, which could adversely affect global economic conditions, and adverse changes in the global banking system or global economy may have a material adverse effect on our business.
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Adverse conditions and disruptions in European economies could have a material adverse effect on our
business.
Our business can be affected by a number of factors that are beyond our control, such as general geopolitical, economic and business conditions.
Political uncertainty has created financial and economic uncertainty, including as a result of the United Kingdom's June 2016 referendum to withdraw from the EU (commonly referred to as "Brexit"). The
economic consequences of Brexit, including the possible repeal of open-skies agreements, could have a material adverse effect on our business. Further, many of the structural issues facing the EU
following the European Debt Crisis and Brexit remain, and problems could resurface that could affect financial market conditions, and, possibly, our business, results of operations, financial
condition and liquidity, particularly if they lead to the exit of one or more countries from the European Monetary Union (the "EMU") or the exit of additional countries from the EU. If one or more
countries exits the EMU, there would be significant uncertainty with respect to outstanding obligations of counterparties and debtors in any exiting country, whether sovereign or otherwise, and it
would likely lead to complex and lengthy disputes and litigation. Additionally, it is possible that political events in Europe could lead to the complete dissolution of the EMU or EU. The partial or
full breakup of the EMU or EU would be unprecedented and its impact highly uncertain, including with respect to our business.
If the effects of terrorist attacks, war or armed hostilities adversely affect the financial condition of the
airline industry, our lessees might not be able to meet their lease payment obligations to us.
Terrorist attacks, war or armed hostilities, or the fear of such events, have historically had a negative impact on the aviation industry and
could result in:
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higher costs to the airlines due to the increased security measures;
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decreased passenger demand and revenue due to the inconvenience of additional security measures or concerns about the safety of flying;
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the imposition of "no-fly zone" or other restrictions on commercial airline traffic in certain regions;
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uncertainty of the price and availability of jet fuel and the cost and practicability of obtaining fuel hedges;
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higher financing costs and difficulty in raising the desired amount of proceeds on favorable terms, if at all;
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significantly higher costs of aviation insurance coverage for future claims caused by acts of war, terrorism, sabotage, hijacking and other
similar perils, or the unavailability of certain types of insurance;
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inability of airlines to reduce their operating costs and conserve financial resources, taking into account the increased costs incurred as a
consequence of such events;
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special charges recognized by some operators, such as those related to the impairment of aircraft and engines and other long-lived assets
stemming from the grounding of aircraft as a result of terrorist attacks, economic conditions and airline reorganizations; and
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an airline becoming insolvent and/or ceasing operations.
For
example, as a result of the September 11, 2001 terrorist attacks in the United States and subsequent terrorist attacks abroad, notably in the Middle East, Southeast Asia and
Europe, increased security restrictions were implemented on air travel, costs for aircraft insurance and security measures
increased, passenger and cargo demand for air travel decreased, and operators faced difficulties in acquiring war risk and other insurance at reasonable costs. Sanctions against Russia, uncertainty
regarding tensions between Ukraine and Russia, the situation in Iraq and Syria, the Israeli/Palestinian conflict, tension over the nuclear program of North Korea, political instability in the Middle
East and North Africa, the territorial disputes between Japan and China and the recent tensions in the South China Sea could lead to further instability in these regions.
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Terrorist attacks, war or armed hostilities, or the fear of such events, in these or any other regions, could adversely affect the aviation industry and the
financial condition and liquidity of our lessees, as well as aircraft values and rental rates. In addition, such events might cause certain aviation insurance to become available only at significantly
increased premiums or with reduced amounts of coverage that are insufficient to comply with the current requirements of aircraft lenders and lessors or with applicable government regulations, or not
to be available at all. Although some governments provide for limited coverage under government programs for specified types of aviation insurance, these programs may not be available at the relevant
time or governments may not pay under these programs in a timely fashion.
Such
events are likely to cause our lessees to incur higher costs and to generate lower revenues, which could result in a material adverse effect on their financial condition and
liquidity, including their ability to make rental and other lease payments to us or to obtain the types and amounts of insurance we
require. This in turn could lead to aircraft groundings or additional lease restructurings and repossessions, increase our cost of re-leasing or selling aircraft, impair our ability to re-lease or
otherwise dispose of aircraft on favorable terms or at all, or reduce the proceeds we receive for our aircraft in a disposition.
The effects of epidemic diseases and natural disasters, such as extreme weather conditions, floods,
earthquakes and volcano eruptions, may adversely affect our lessees' ability to meet their lease payment obligations to us.
The outbreak of epidemic diseases, such as previously experienced with Ebola, measles, Severe Acute Respiratory Syndrome (SARS), H1N1 (swine
flu) and Zika virus, could materially and adversely affect passenger demand for air travel. Similarly, the lack of air travel demand or the inability of airlines to operate to or from certain regions
due to severe weather conditions and natural disasters, including floods, earthquakes and volcano eruptions, could impact the financial health of certain airlines, including our lessees. These
consequences could result in our lessees' inability to satisfy their lease payment obligations to us, which in turn would materially and adversely affect our financial results.
Airline reorganizations could impair our lessees' ability to comply with their lease payment obligations to
us.
In recent years, several airlines have filed for protection under their local bankruptcy and insolvency laws and, over the past several years,
certain airlines have gone into liquidation. Historically, airlines involved in reorganizations have undertaken substantial fare discounting to maintain cash flows and to encourage continued customer
loyalty. The bankruptcies have led to the grounding of significant numbers of aircraft, rejection of leases and negotiated reductions in aircraft lease rentals, with the effect of depressing aircraft
market values. Additional reorganizations or liquidations by airlines under applicable bankruptcy or reorganization laws or further rejection or abandonment of aircraft by airlines in bankruptcy
proceedings may depress aircraft values and aircraft lease rates. Additional grounded aircraft and lower market values would adversely affect our ability to sell certain of our aircraft or re-lease
other aircraft at favorable rates if at all.
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Our lessees may fail to properly maintain our aircraft.
We may be exposed to increased maintenance costs for our leased aircraft if lessees fail to properly maintain the aircraft or pay supplemental
maintenance rents. Under our leases, our lessees are primarily responsible for maintaining our aircraft and complying with all governmental requirements applicable to the lessee and the aircraft,
including operational, maintenance, government agency oversight, registration requirements and airworthiness directives. We also require many of our lessees to pay us supplemental maintenance rents.
If a lessee fails to perform required maintenance on our aircraft during the term of the lease, the aircraft's market value may decline, which would result in lower revenues from its subsequent lease
or sale, or the aircraft might be grounded. Maintenance failures by a lessee would also likely require us to incur maintenance and modification costs, which could be substantial, upon the termination
of the applicable lease to restore the aircraft to an acceptable condition prior to sale or re-leasing. Supplemental maintenance rents paid by our lessees may not be sufficient to fund such
maintenance costs. If our lessees fail to meet their obligations to pay supplemental maintenance rents or fail to perform required scheduled maintenance, or if we are required to incur unexpected
maintenance costs, our financial results may be materially and adversely affected.
Our lessees may fail to adequately insure our aircraft.
While an aircraft is on lease, we do not directly control its operation. Nevertheless, because we hold title to the aircraft, we could be held
liable for losses resulting from its operation under one or more legal theories in certain jurisdictions around the world, or at a minimum, we might be required to expend resources in our defense. We
require our lessees to obtain specified levels of insurance and indemnify us for, and insure against, such operational liabilities. However, some lessees may fail to maintain adequate insurance
coverage during a lease term, which, although constituting a breach of the lease, would require us to take some corrective action, such as terminating the lease or securing insurance for the aircraft.
In
addition, there are certain risks of losses our lessees face that insurers may be unwilling to cover or for which the cost of coverage would be prohibitively expensive. For example,
following the terrorist attacks of September 11, 2001, aviation insurers significantly reduced the amount of coverage available to airlines for liability to persons other than airline employees
or passengers for claims resulting from acts of terrorism, war or similar events and significantly increased the premiums for third party war risk and terrorism liability insurance and coverage in
general. Therefore, our lessees' insurance coverage may not be sufficient to cover all claims that could be asserted against us arising from the operation of our aircraft.
Inadequate
insurance coverage or default by lessees in fulfilling their indemnification or insurance obligations to us will reduce the insurance proceeds that would be received by us in
the event we are
sued and are required to make payments to claimants. Moreover, our lessees' insurance coverage is dependent on the financial condition of insurance companies, which might not be able to pay claims. A
reduction in insurance proceeds otherwise payable to us as a result of any of these factors could materially and adversely affect our financial results.
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If our lessees fail to cooperate in returning our aircraft following lease terminations, we may encounter
obstacles and are likely to incur significant costs and expenses conducting repossessions.
Our legal rights and the relative difficulty of repossession vary significantly depending on the jurisdiction in which an aircraft is located
and the applicable law. We may need to obtain a court order or consents for de-registration or re-export, a process that can differ substantially in different countries. Where a lessee or other
operator flies only domestic routes in the jurisdiction in which the aircraft is registered, repossessing and exporting the aircraft may be challenging, especially if the jurisdiction permits the
lessee or the other operator to resist de-registration. When a defaulting lessee is in bankruptcy, protective administration, insolvency or similar proceedings, additional limitations may apply. For
example, certain jurisdictions give rights to the trustee in bankruptcy or a similar officer to assume or reject the lease or to assign it to a third party, or entitle the lessee or another third
party to retain possession of the aircraft without paying lease rentals or performing all or some of the obligations under the relevant lease. Certain of our lessees are partially or wholly owned by
government-related entities, which can complicate our efforts to repossess our aircraft in that government's jurisdiction. If we encounter any of these difficulties, we may be delayed in, or prevented
from, enforcing certain of our rights under a lease and in re-leasing the affected aircraft.
When
conducting a repossession, we are likely to incur significant costs and expenses that are unlikely to be recouped. These include legal and other expenses of court or other
governmental proceedings, including the cost of posting security bonds or letters of credit necessary to effect repossession of the aircraft, particularly if the lessee is contesting the proceedings
or is in bankruptcy. We must absorb the cost of lost revenue for the time the aircraft is off-lease. We may incur substantial maintenance, refurbishment or repair costs that a defaulting lessee has
failed to pay and are necessary to put the aircraft in suitable condition for re-lease or sale. We may incur significant costs in retrieving or recreating aircraft records required for registration of
the aircraft, and in obtaining the certificate of airworthiness for an aircraft. It may be necessary to pay to discharge liens or pay taxes and other governmental charges on the aircraft to obtain
clear possession and to remarket the aircraft effectively, including, in some cases, liens that the lessee may have incurred in connection with the operation of its other aircraft. We may also incur
other costs in connection with the physical possession of the aircraft.
Based
on historical rates of airline defaults and bankruptcies, at least some of our lessees are likely to default on their lease obligations or file for bankruptcy in the ordinary
course of our business. If we incur significant costs in repossessing our aircraft, our financial results may be materially and adversely affected.
If our lessees fail to discharge aircraft liens for which they are responsible, we may be obligated to pay to
discharge the liens.
In the normal course of their business, our lessees are likely to incur aircraft and engine liens that secure the payment of airport fees and
taxes, custom duties, Eurocontrol and other air navigation charges, landing charges, crew wages, and other liens that may attach to our aircraft. Aircraft may also be subject to mechanic's liens as a
result of routine maintenance performed by third parties on behalf of our customers. Some of these liens can secure substantial sums, and if they attach to entire fleets of aircraft, as permitted in
certain jurisdictions for certain kinds of liens, they may exceed the value of the aircraft itself. Although the financial obligations relating to these liens are the contractual responsibility of our
lessees, if they fail to fulfill their obligations, the liens may ultimately become our financial responsibility. Until they are discharged, these liens could impair our ability to repossess, re-lease
or sell our aircraft or engines. In some jurisdictions, aircraft and engine liens may give the holder thereof the right to detain or, in limited cases, sell or cause the forfeiture of the aircraft. If
we are obliged to pay a large amount to discharge a lien, or if we are unable take possession of our aircraft subject to a lien in a timely and cost-effective manner, it could materially and adversely
affect our financial results.
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In certain countries, an engine affixed to an aircraft may become an accession to the aircraft and we may not
be able to exercise our ownership rights over the engine.
In some jurisdictions, an engine affixed to an aircraft may become an accession to the aircraft, whereby the ownership rights of the owner of
the aircraft supersede the ownership rights of the owner of the engine. If an aircraft is security for the owner's obligations to a third party, the security interest in the aircraft may supersede our
rights as owner of the engine. This legal principle could limit our ability to repossess an engine in the event of a lease default while the aircraft with our engine installed remains in such
jurisdiction. We would suffer a substantial loss if we were not able to repossess engines leased to lessees in these jurisdictions, which would materially and adversely affect our financial results.
If our lessees encounter financial difficulties and we restructure or terminate our leases, we are likely to
obtain less favorable lease terms.
If a lessee delays, reduces, or fails to make rental payments when due, or has advised us that it will do so in the future, we may elect or be
required to restructure or terminate the lease. A restructured lease will likely contain terms that are less favorable to us. If we are unable to agree on a restructuring and we terminate the lease,
we may not receive all or any payments still outstanding, and we may be unable to re-lease the aircraft promptly and at favorable rates, if at all. We have conducted restructurings and terminations in
the ordinary course of our business, and we expect more will occur in the future. If we are obligated to perform a significant number of restructurings and terminations, the associated reduction in
lease revenue could materially and adversely affect our financial results and cash flows.
The advent of superior aircraft and engine technology or the introduction of a new line of aircraft could
cause our existing aircraft portfolio to become outdated and therefore less desirable.
As manufacturers introduce technological innovations and new types of aircraft and engines, some of the aircraft and engines in our aircraft
portfolio may become less desirable to potential lessees. New aircraft manufacturers, such as Mitsubishi Aircraft Corporation in Japan, JSC United Aircraft Corporation in Russia and Commercial
Aircraft Corporation of China, Ltd. in China could produce aircraft that compete with current offerings from Airbus, Aerei da Trasporto Regionale (ATR), Boeing, Bombardier and Embraer.
Additionally, new manufacturers may develop a narrowbody aircraft that competes with established aircraft types from Airbus and Boeing, putting downward price pressure on and decreasing the
marketability of aircraft from Airbus and Boeing. New aircraft types that are introduced into the market could be more attractive for the target lessees of our aircraft. The development of more
fuel-efficient engines could make aircraft in our portfolio with engines that are not as fuel-efficient less attractive to potential lessees. In addition, the imposition of increasingly stringent
noise or emissions regulations may make some of our aircraft and engines less desirable in the marketplace. A decrease in demand for our aircraft as a result of any of these factors could materially
and adversely affect our financial results.
Airbus and Boeing have launched new aircraft types, which could decrease the value and lease rates of
aircraft in our fleet.
Airbus and Boeing have launched several new aircraft types in recent years, including the Boeing 787 Family, the Boeing 737MAX
Family, the Boeing 777X, the Airbus A320neo Family, the Airbus A330neo Family, and the Airbus A350 Family. The availability of these new aircraft types, and potential variants of these new
aircraft types, may have an adverse effect on residual value and future lease rates of older aircraft types and variants. The development of these new types and variants of such new types could
decrease the desirability of the older types and variants and thereby increase the supply of the older types and variants in the marketplace. This increase in supply could, in turn, reduce both future
residual values and lease rates for such older aircraft types and variants.
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From time to time, Airbus and Boeing have announced scheduled production increases, which could result in
overcapacity and decrease the value and lease rates of aircraft in our fleet.
The market may not be able to absorb the scheduled production increases announced by Airbus and Boeing. If the additional capacity scheduled to
be produced by the manufacturers exceeds demand, the resulting overcapacity could have a negative effect on aircraft values and lease rates. If overall lending to purchasers of aircraft does not
increase in line with the increased aircraft production, the cost of lending or the ability to obtain debt to finance aircraft purchases could be negatively affected. Any such decrease in aircraft
values and lease rates, or increase in the cost or availability of funding, could materially and adversely affect our financial results.
There are a limited number of aircraft and engine manufacturers and we depend on their ability to meet their
obligations.
The supply of commercial jet aircraft is dominated by a small number of airframe and engine manufacturers. As a result, we are dependent on
their ability to remain financially stable, manufacture products and related components that meet the airlines' demands and fulfill their contractual obligations to us. In the past we have experienced
delays by the manufacturers in meeting their obligations to us and other third parties. If in the future the manufacturers fail to fulfill their contractual obligations to us, bring aircraft to market
that do not meet customers' expectations, or do not respond appropriately to changes in the market environment, we may experience, among other things:
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missed or late delivery of aircraft and engines ordered by us and an inability to meet our contractual obligations to our customers, resulting
in lost or delayed revenues, lower growth rates and strained customer relationships;
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an inability to acquire aircraft and engines and related components on terms that will allow us to lease those aircraft and engines to
customers at a profit, resulting in lower growth rates or a contraction in our aircraft portfolio;
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a market environment with too many aircraft and engines available, creating downward pressure on demand for the aircraft and engines in our
fleet and reduced market lease rates and sale prices;
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poor customer support or reputational damage from the manufacturers of aircraft, engines and components resulting in reduced demand for a
particular manufacturer's product, creating downward pressure on demand for those aircraft and engines in our fleet and reduced market lease rates and sale prices for those aircraft and engines;
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reduction in our competitiveness due to deep discounting by the manufacturers, which may lead to reduced market lease rates and sale prices and
may affect our ability to remarket or sell some of the aircraft and engines in our portfolio; and
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technical or other difficulties with aircraft after delivery that subject such aircraft to operating restrictions or groundings, resulting in a
decline in value and lease rates of such aircraft and impairing our ability to lease or dispose of such aircraft on favorable terms.
Moreover,
our purchase agreements with manufacturers and the leases we have signed with our customers for future lease commitments are all subject to cancellation rights related to
delays in delivery dates. Any manufacturer delays for aircraft that we have committed to lease could strain our relations with our customers, and cancellation of such leases by the lessees could have
a material adverse effect on our financial results.
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Existing and future litigation against us could materially and adversely affect our business, financial
position, liquidity or results of operations.
We are, and from time to time in the future may be, a defendant in lawsuits relating to our business. We cannot accurately predict the ultimate
outcome of any litigation due to its inherent uncertainties. An unfavorable outcome could materially and adversely affect our business, financial position, liquidity or results of operations. In
addition, regardless of the outcome of any litigation, we may be required to devote substantial resources and executive time to the defense of such actions. For a description of certain pending
litigation involving our business, please refer to Note 29
Commitments and contingencies
to our Consolidated Financial Statements
included in this annual report.
Our international operations expose us to geopolitical, economic and legal risks associated with a global
business.
We conduct our business in many countries. There are risks inherent in conducting our business internationally,
including:
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general political and economic instability in international markets;
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limitations or the repatriation of our assets;
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expropriation of our international assets; and
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different liability standards and legal systems that may be less developed and less predictable than those in advanced economies.
Furthermore,
the new U.S. presidential administration has proposed or is considering various actions that could affect U.S. trade policy or practices, which could, among other things,
adversely affect travel to or from the United States. These factors may have a material and adverse effect on our financial results.
We may enter into strategic ventures that pose risks, including a lack of complete control over the
enterprise, and potential unforeseen risks, any of which could adversely impact our financial results.
We may occasionally enter into strategic ventures or investments with third parties in order to take advantage of favorable financing
opportunities, to share capital or operating risk, or to earn aircraft management fees. These strategic ventures and investments may subject us to various risks, including those arising from our
possessing limited decision-making rights in the enterprise or over the related aircraft. If we were unable to resolve a dispute with a strategic partner who controls ultimate decision-making in such
a venture or retains material managerial veto rights, we might reach an impasse which may lead to the liquidation of our investment at a time and in a manner that would result in our losing some or
all of our original investment and/or the incurrence of other losses, which could adversely impact our financial results.
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We are indirectly subject to many of the economic and political risks associated with emerging markets.
We derive substantial lease revenue (approximately 57% in 2017, 59% in 2016 and 60% in 2015) from airlines in emerging market countries.
Emerging market countries have less developed economies and are more vulnerable to economic and political problems and may experience significant fluctuations in gross domestic product, interest rates
and currency exchange rates, as well as civil disturbances, government instability, nationalization and expropriation of private assets and the imposition of taxes or other charges by government
authorities. The occurrence of any of these events in markets served by our lessees and the resulting economic instability that may arise as a result of these events could adversely affect the value
of our ownership interest in aircraft subject to lease in such countries, or the ability of our lessees that operate in these markets to meet their lease obligations. As a result, lessees that operate
in emerging market countries may be more likely to default than lessees that operate in developed countries. In addition, legal systems in emerging market countries may be less developed, which could
make it more difficult for us to enforce our legal rights in such countries. For these and other reasons, our financial results may be materially and adversely affected by economic and political
developments in emerging market countries.
Because our lessees are concentrated in certain geographical regions, we have concentrated exposure to the
political and economic risks associated with those regions.
Through our lessees and the countries in which they operate, we are exposed to the specific economic and political conditions and associated
risks of those jurisdictions. For example, we have large concentrations of lessees in Russia, and therefore have increased exposure to the economic and political conditions in that country. These
risks can include economic recessions, burdensome local regulations or, in extreme cases, increased risks of requisition of our aircraft. An adverse political or economic event in any region or
country in which our lessees are concentrated or where we have a large number of aircraft could affect the ability of our lessees in that region or country to meet their obligations to us, or expose
us to various legal or political risks associated with the affected jurisdictions, all of which could have a material and adverse effect on our financial results.
We are subject to various risks and requirements associated with transacting business in many countries.
Our international operations expose us to trade and economic sanctions, export controls and other restrictions imposed by the United States, the
United Kingdom, or other governments or organizations. For example, the U.S. Departments of Justice, Commerce, State and Treasury and other U.S. federal agencies and authorities have a broad range of
civil and criminal penalties they may seek to impose against corporations and individuals for violations of economic sanctions laws, export control laws, the Foreign Corrupt Practices Act, and other
U.S. federal statutes and regulations, including those established by the Office of Foreign Asset Control. Under these laws and regulations, the U.S. government may require export licenses, may seek
to impose modifications to business practices, including cessation of business activities in sanctioned countries, and modifications to compliance programs, which may increase compliance costs, and
may subject us to fines, penalties and other sanctions. A violation of any of these laws or regulations could materially and adversely impact our business, operating results, and financial condition.
We
have implemented and maintain in effect policies and procedures designed to ensure compliance by us, our subsidiaries and our directors, officers, employees, consultants and agents
with respect to various export control, anti-corruption, anti-terrorism and anti-money laundering laws and regulations. However, such personnel could engage in unauthorized conduct for which we may be
held responsible. Violations of such laws and regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could materially and adversely affect our
financial results.
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Our ability to operate in some countries is restricted by foreign regulations and controls on investments.
Many countries restrict, or in the future might restrict, foreign investments in a manner adverse to us. These restrictions and controls have
limited, and may in the future restrict or preclude, our investment in joint ventures or the acquisition of businesses in certain jurisdictions or may increase the cost to us of entering into such
transactions. Various governments, particularly in the Asia/Pacific region, require governmental approval before foreign persons may make investments in domestic businesses and also limit the extent
of any such investments. Furthermore, various governments may reserve the right to approve the repatriation of capital by, or the payment of dividends to, foreign investors. Restrictive policies
regarding foreign investments may increase our costs of pursuing growth opportunities in foreign jurisdictions, which could materially and adversely affect our financial results.
Our aircraft are subject to various environmental regulations.
Governmental regulations regarding aircraft and engine noise and emissions levels apply based on where the relevant airframe is registered and
where the aircraft is operated. For example, jurisdictions throughout the world have adopted noise regulations that require all aircraft to comply with noise level standards. In addition, the United
States and the International Civil Aviation Organization ("ICAO") have adopted a more stringent set of standards for noise levels that apply to engines manufactured or certified beginning in 2006.
Currently, United States regulations do not require any phase-out of aircraft that qualify with the older standards, but the EU has established a framework for the imposition of operating limitations
on aircraft that do not comply with the newer standards. These regulations could limit the economic life of certain of our aircraft and engines, reduce their value, limit our ability to lease or sell
the non-compliant aircraft and engines or, if engine modifications are permitted, require us to make significant additional investments in the aircraft and engines to make them compliant.
In
addition to more stringent noise restrictions, the United States, EU and other jurisdictions have imposed more stringent limits on the emission of nitrogen oxide, carbon monoxide and
carbon dioxide from engines. Although current emissions control laws generally apply to newer engines, new laws could be passed in the future that also impose limits on older engines, and therefore
our older engines could be subject to existing or new emissions limitations or indirect taxation. For example, the EU issued a directive in January 2009 to include aviation within the scope of its
greenhouse gas emissions trading scheme, thereby requiring that all flights arriving, departing or flying within any EU country, beginning on January 1, 2012, comply with the scheme and
surrender allowances for emissions, regardless of the age of the engine used in the aircraft. In addition, the United States Environmental Protection Agency ruled that jet engine exhaust endangers
public health by contributing to climate change, increasing the likelihood that regulations will be proposed in this regard. Limitations on emissions such as the one in the EU could favor younger,
more fuel efficient aircraft since they generally produce lower levels of emissions per passenger, which could adversely affect our ability to
re-lease or otherwise dispose of less efficient aircraft on a timely basis, at favorable terms, or at all. This is an area of law that is rapidly changing and as of yet remains specific to certain
jurisdictions. While we do not know at this time whether new emission control laws will be passed, and if passed what impact such laws might have on our business, any future emissions limitations
could adversely affect us.
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Our operations are subject to various environmental regulations.
Our operations are subject to various federal, state and local environmental, health and safety laws and regulations in the United States,
including those relating to the discharge of materials into the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and
safety of our employees. A violation of these laws and regulations or permit conditions can result in substantial fines, permit revocation or other damages. Many of these laws impose liability for
clean-up of contamination that may exist at our facilities (even if we did not know of or did not cause the contamination) or related personal injuries or natural resource damages or costs relating to
contamination at third party waste disposal sites where we have sent or may send waste. We may not be in complete compliance with these laws, regulations or permits at all times. We may have liability
under environmental laws or be subject to legal actions brought by governmental authorities or other parties for actual or alleged violations of, or liability under, environmental, health and safety
laws, regulations or permits.
If a decline in demand for certain aircraft causes a decline in its projected lease rates, or if we dispose
of an aircraft for a price that is less than its depreciated book value on our balance sheet, then we will recognize impairments or make fair value adjustments.
We test long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be
recoverable from their undiscounted cash flows. If the gross cash flow test fails, the difference between the fair value and the carrying amount of the aircraft is recognized as an impairment loss.
Factors that may contribute to impairment charges include, but are not limited to, unfavorable airline industry trends affecting the residual values of certain aircraft types, high fuel prices and
development of more fuel efficient aircraft shortening the useful lives of certain aircraft, management's expectations that certain aircraft are more likely than not to be parted-out or otherwise
disposed of sooner than their expected life, and new technological developments. Cash flows supporting carrying values of older aircraft are more dependent upon current lease contracts. In addition,
we believe that residual values of older aircraft are more exposed to non-recoverable declines in value in the current economic environment.
If
economic conditions deteriorate, we may be required to recognize impairment losses. In that event, our estimates and assumptions regarding forecasted cash flows from our long-lived
assets would need to be reassessed, including the duration of the economic downturn and the timing and strength of the pending recovery, both of which are important variables for purposes of our
long-lived asset impairment tests. Any of our assumptions may prove to be inaccurate, which could adversely impact forecasted cash flows of certain long-lived assets, especially for older aircraft. If
so, it is possible that an impairment may be triggered for other long-lived assets in the future and that any such impairment amounts may be material. As of December 31, 2017, 173 of our owned
aircraft under operating leases were 15 years of age or older. These aircraft represented approximately 6% of the net book value of our total flight equipment and lease-related assets and
liabilities as of December 31, 2017.
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A cyberattack could lead to a material disruption of our IT systems or the IT systems of our third party
providers and the loss of business information, which may hinder our ability to conduct our business effectively and may result in lost revenues and additional costs.
Parts of our business depend on the secure operation of our information technology, or IT, systems and the IT systems of our third party
providers to manage, process, store and transmit information associated with aircraft leasing. Like other global companies, we have, from time to time, experienced threats to our data and systems,
including malware and computer virus attacks, internet network scans, systems failures and disruptions. A cyberattack that bypasses our IT security systems or the IT security systems of our third
party providers, causing an IT security breach, could lead to a material disruption of our IT systems or the IT systems of our third party providers, as applicable, and adversely impact our daily
operations and cause the loss of sensitive information, including our own proprietary information and that of our customers, suppliers and employees. Such losses could harm our reputation and result
in competitive disadvantages, litigation, regulatory enforcement actions, lost revenues, additional costs and liability. While we devote substantial resources to maintaining adequate levels of
cybersecurity, our resources and technical sophistication may not be adequate to prevent all types of cyberattacks.
We could suffer material damage to, or interruptions in, our IT systems or the IT systems of our third party
providers as a result of external factors, staffing shortages or difficulties in updating our existing software or developing or implementing new software.
We depend largely upon our IT systems and the IT systems of our third party providers in the conduct of all aspects of our operations. Such
systems are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches, fire and natural disasters. Damage or interruption to
these IT systems may require a significant investment to fix or replace them, and we may suffer interruptions in our operations in the interim. In addition, we are currently pursuing a number of
IT-related projects that will require ongoing IT-related development and conversion of existing systems. Costs and potential problems and interruptions associated with the implementation of new or
upgraded systems and technology or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations. Any material interruptions or failures in our
IT systems may have a material adverse effect on our business or results of operations.
Risks related to our organization and structure
We are a public limited liability company incorporated in the Netherlands ("naamloze vennootschap" or "N.V.")
and it may be difficult to obtain or enforce judgments against us or our executive officers, some of our directors and some of our named experts in the United States.
We were incorporated under the laws of the Netherlands and, as such, the rights of holders of our ordinary shares and the civil liability of our
directors will be governed by the laws of the Netherlands and our articles of association. The rights of shareholders under the laws of the Netherlands may differ from the rights of shareholders of
companies incorporated in other jurisdictions. Many of our directors and executive officers and most of our assets and the assets of many of our directors are located outside the United States. In
addition, our articles of association do not provide for U.S. courts as a venue for, or for the application of U.S. law to, lawsuits against us, our directors and executive officers. As a result, you
may not be able to serve process on us or on such persons in the United States or obtain or enforce judgments from U.S. courts against us or them based on the civil liability provisions of the
securities laws of the United States. There is doubt as to whether the Dutch courts would enforce certain civil liabilities under U.S. securities laws in original actions and enforce claims for
punitive damages.
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Under
our articles of association, we indemnify and hold our directors, officers and employees harmless against all claims and suits brought against them, subject to limited exceptions.
Under our articles of association, to the extent allowed by law, the rights and obligations among or between us, any of our current or former directors, officers and employees and any current or
former shareholder shall be governed exclusively by the laws of the Netherlands and subject to the jurisdiction of the Dutch courts, unless such rights or obligations do not relate to or arise out of
their capacities listed above. Although there is doubt as to whether U.S. courts would enforce such provision in an action brought in the United States under U.S. securities laws, such provision could
make judgments obtained outside of the Netherlands more difficult to enforce against our assets in the Netherlands or jurisdictions that would apply Dutch law.
If our subsidiaries do not make distributions to us we will not be able to pay dividends.
Substantially all of our assets are held by, and substantially all of our revenues are generated by our subsidiaries. While we do not currently,
and do not currently intend to, pay dividends, we will be limited in our ability to pay dividends unless we receive dividends or other cash flow from our subsidiaries. A substantial portion of our
owned aircraft are held through SPEs or finance structures that borrow funds to finance or refinance the aircraft. The terms of these financings place restrictions on distributions of funds to us. If
these limitations prevent distributions to us or our subsidiaries do not generate positive cash flows, we will be limited in our ability to pay dividends and may be unable to transfer funds between
subsidiaries if required to support our subsidiaries.
As a foreign private issuer, we are permitted to file less information with the SEC than a company
incorporated in the United States. Accordingly, there may be less publicly available information concerning us than there is for companies incorporated in the United States.
As a foreign private issuer, we are exempt from certain rules under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act"),
which impose disclosure requirements, as well as procedural requirements, for proxy solicitations under Section 14 of the Exchange Act. We are not required to file periodic reports and
financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act, nor are we generally required to comply with the SEC's
Regulation FD, which restricts the selective disclosure of material non-public information. In addition, our officers and directors are exempt from the periodic reporting and short-swing profit
recovery requirements in Section 16 of the Exchange Act. As a result, there may be less publicly available information concerning us than there is for a company that files as a domestic issuer.
The effect of purchases and sales of our ordinary shares by the hedge counterparties (or their affiliates or
agents) to modify or terminate their hedge positions may have a negative effect on the market price of our ordinary shares.
We have been advised that Waha, which previously was a significant direct AerCap shareholder, has entered into funded collar transactions
relating to its AerCap ordinary shares, pursuant to which, we have been advised, collar counterparties (or their affiliates or agents) have borrowed from Waha and re-sold, and may continue to purchase
and sell, our ordinary shares. The purchases and sales of our ordinary shares by the collar counterparties (or their affiliates or agents) to modify the collar counterparties' hedge positions from
time to time during the term of the funded collar transactions may variously have a positive, negative or neutral impact on the market price of our ordinary shares and may affect the volatility of the
market price of our ordinary shares, depending on market conditions at such times. In addition, purchases of our ordinary shares by the collar counterparties (or their affiliates or agents) in
connection with the termination by Waha of any portion of the loan of our ordinary shares to the collar counterparties under the funded collar transactions, or cash settlement of any funded collar
transaction, may have the effect of increasing, or limiting a decrease in, the market price of our ordinary shares during the relevant unwind period.
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Risks related to taxation
We may become a passive foreign investment company ("PFIC") for U.S. federal income tax purposes.
We do not believe we will be classified as a PFIC for 2017. We cannot yet make a determination as to whether we will be classified as a PFIC for
2018 or subsequent years. The determination as to whether a foreign corporation is a PFIC is a complex determination based on all of the relevant facts and circumstances and depends on the
classification of various assets and income under PFIC rules. In our case, the determination is further complicated by the application of the PFIC rules to leasing companies and to joint ventures and
financing structures common in the aircraft leasing industry. It is unclear how some of these rules apply to us. Further, this determination must be tested annually and our circumstances may change in
any given year. We do not intend to make decisions regarding the purchase and sale of aircraft with the specific purpose of reducing the likelihood of our becoming a PFIC. Accordingly, our business
plan may result in our engaging in activities that could cause us to become a PFIC. If we are or become a PFIC, U.S. shareholders may be subject to increased U.S. federal income taxes on a sale or
other disposition of our ordinary shares and on the receipt of certain distributions and will be subject to increased U.S. federal income tax reporting requirements. See "Item 10. Additional
InformationTaxationU.S. tax considerations" for a more detailed discussion of the consequences to you if we are treated as a PFIC and a discussion of certain elections that
may be available to mitigate the effects of that treatment. We urge you to consult your own tax advisors regarding the application of the PFIC rules to your particular circumstances.
We may become subject to income or other taxes in jurisdictions which would adversely affect our financial
results.
We and our subsidiaries are subject to the income tax laws of Ireland, the Netherlands, the United States and other jurisdictions in which our
subsidiaries are incorporated or based. Our effective tax rate in any period is impacted by the source and the amount of earnings among our different tax jurisdictions. A change in the division of our
earnings among our tax jurisdictions could have a material impact on our effective tax rate and our financial results. In addition, we or our subsidiaries may be subject to additional income or other
taxes in these and other jurisdictions by reason of the management and control of our subsidiaries, our activities and operations, where our aircraft operate, where the lessees of our aircraft (or
others in possession of our aircraft) are located or changes in tax laws, regulations or accounting principles. Although we have adopted guidelines and operating procedures to ensure our subsidiaries
are appropriately managed and controlled, we may be subject to such taxes in the future and such taxes may be substantial. The imposition of such taxes could have a material adverse effect on our
financial results.
We may incur current tax liabilities in our primary operating jurisdictions in the future.
We expect to make current tax payments in some of the jurisdictions where we do business in the normal course of our operations. Our ability to
defer the payment of some level of income taxes to future periods is dependent upon the continued benefit of accelerated tax depreciation on our flight equipment in some jurisdictions, the continued
deductibility of external and intercompany financing arrangements and the application of tax losses prior to their expiration in certain tax jurisdictions, among other factors. The level of current
tax payments we make in any of our primary operating jurisdictions could adversely affect our cash flows and have a material adverse effect on our financial results.
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We may become subject to additional Irish taxes based on the extent of our operations carried on in Ireland.
Our Irish tax resident group companies are currently subject to Irish corporate income tax on trading income at a rate of 12.5%, on capital
gains at 33% and on other income at 25%. We expect that substantially all of our Irish income will be treated as trading income for tax purposes in future periods. As of December 31, 2017, we
had significant Irish tax losses available to carry forward against our trading income. The continued application of the 12.5% tax rate to trading income generated in our Irish tax resident group
companies and the ability to carry forward Irish tax losses to offset future taxable trading income depends in part on the extent and nature of activities carried on in Ireland both in the past and in
the future. Our Irish tax resident group companies intend to carry on their activities in Ireland so that the 12.5% rate of tax applicable to trading income will apply and that they will be entitled
to offset future income with tax losses arising from the same trading activity.
We may fail to qualify for benefits under one or more tax treaties.
We do not expect that our subsidiaries located outside of the United States will have any material U.S. federal income tax liability by reason
of activities we carry out in the United States and the lease of assets to lessees that operate in the United States. This conclusion will depend, in part, on continued qualification for the benefits
of income tax treaties between the United States and other countries in which we are subject to tax (particularly Ireland). That in turn may depend on, among others, the nature and level of activities
carried on by us and our subsidiaries in each jurisdiction, the identity of the owners of equity interests in subsidiaries that are not wholly owned and the identities of the direct and indirect
owners of our indebtedness.
The
nature of our activities may be such that our subsidiaries may not continue to qualify for the benefits under income tax treaties with the United States and that may not otherwise
qualify for treaty benefits. Failure to so qualify could result in the imposition of U.S. federal and state taxes, which could have a material adverse effect on our financial results.
Changes in tax laws may result in additional taxes for us or for our shareholders.
Tax laws and the practice of the local tax authorities in the jurisdictions in which we reside, in which we conduct activities or operations, or
where our aircraft or lessees of our aircraft are located may change in the future. Such changes in tax law or practice could result in additional taxes for us or our shareholders. On
December 22, 2017, the United States enacted new tax legislation (the "Tax Legislation") that significantly revises the Internal Revenue Code of 1986, as amended (the "Code"). The Tax
Legislation included, among other things, a reduction of the U.S. corporate income tax rate, limits on the deductibility of business interest, the ability to deduct certain capital expenditures and a
new minimum tax on certain payments to non-U.S. affiliates of U.S. corporations. The impact of the Tax Legislation on the business and operations of our U.S. subsidiaries is currently unclear. We are
currently conducting an analysis of the Tax Legislation as enacted and its effect on our business. In addition, the Tax Legislation is unclear in certain respects and will require interpretations and
implementing regulations by the IRS, and could also be subject to potential amendments and technical corrections by Congress. Investors should consult with their tax advisors with respect to the
effects of the Tax Legislation on their investment in our common shares.
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The introduction of Base Erosion and Profit Shifting ("BEPS") by the Organization for Economic Cooperation
and Development's ("OECD") may impact our effective rate of tax in future periods.
The OECD issued various final reports under its BEPS action plan in October 2015 ("the BEPS Plan"). The OECD's reports cover issues such as the
prevention of abuse of tax treaties, deductibility of interest costs, determination of permanent establishments and transfer pricing of services. Certain of the proposed BEPS changes to existing
double tax treaties may be implemented by means of a Multi-lateral Instrument ("MLI"). On June 7, 2017, representatives from over 70 countries, including Ireland, participated in the OECD
signing ceremony for the MLI. The MLI seeks to implement agreed tax treaty-related measures combating tax avoidance into bilateral existing tax treaties without the need to renegotiate a new treaty.
It is possible that the MLI may have effect from as early as January 1, 2019, but the effective date could be later. Further changes to tax law will be required in order to fully implement the
BEPS Plan. At this moment, it is difficult to determine what further BEPS actions the governments of the jurisdictions in which we operate will implement. Depending on the nature of the BEPS action
plans adopted, it may result in an increase in our effective tax rate in future periods.
The EU Anti-tax Avoidance proposals may impact our effective rate of tax in future periods.
The EU Commission has published a draft Anti-Tax Avoidance Directive ("EU ATAD") which seeks to oblige all member states to introduce a number
of anti-tax avoidance measures. Many of these measures have been derived from the OECD's BEPS initiative and there are a number of similarities between the OECD proposals and EU ATAD. However, even
where there are common concepts between the OECD BEPS initiative and EU ATAD, there are a number of differences in detail.
Most
of the measures contained in the EU ATAD are due to be implemented with effect from January 1, 2019, though certain measures may be deferred to 2024 in certain circumstances.
The EU ATAD contemplates the introduction of various measures, including a restriction on the deductibility of interest, an exit charge, controlled foreign company rules and a general anti-avoidance
rule. Furthermore, each member state will need to introduce EU ATAD in its own domestic law (to the extent the relevant member state's domestic tax law does not currently contain equivalent
provisions) which may lead to some variances between EU member states. As such, until the detailed provisions for the implementation of the EU ATAD are known in each relevant country (including
Ireland), it is difficult to be conclusive about the directive's potential impact on us.
Item 4. Information on the Company
History and development of the Company
AerCap Holdings N.V. was incorporated in the Netherlands as a public limited liability company ("
naamloze
vennootschap
"
or
"
N.V.
") on July 10, 2006. On November 27, 2006,
we completed the initial public offering of 26.1 million of our ordinary shares on the New York Stock Exchange (the "NYSE"). On August 6, 2007, we completed the secondary offering of
20.0 million additional ordinary shares on the NYSE. Our headquarters is located in Dublin, and we have offices in Shannon, Los Angeles, Singapore, Amsterdam, Fort Lauderdale, Shanghai and Abu
Dhabi. We also have representative offices at the world's largest aircraft manufacturers, Boeing in Seattle and Airbus in Toulouse.
As
of December 31, 2017, we had 167,847,345 ordinary shares issued, including 152,992,101 ordinary shares issued and outstanding, and 14,855,244 ordinary shares held as treasury
shares. Our issued and outstanding ordinary shares included 3,007,752 shares of unvested restricted stock.
Our
principal executive offices are located at AerCap House, 65 St. Stephen's Green, Dublin 2, Ireland, and our general telephone number is +353 1 819 2010. Our
website address is
www.aercap.com
. Information contained on our website does not constitute a part of this annual report. Puglisi & Associates is
our authorized representative in the United States. The address of Puglisi & Associates is 850 Liberty Avenue, Suite 204, Newark, DE 19711 and their general telephone number is
+1 (302) 738-6680.
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Capital expenditures
Our primary capital expenditure is the purchase of aircraft under aircraft purchase agreements with Airbus, Boeing and Embraer. Please refer to
"Item 5. Operating and Financial Review and ProspectsLiquidity and capital resources" for a detailed discussion of our capital expenditures currently in progress. The following
table presents our capital expenditures for the years ended December 31, 2017, 2016 and 2015:
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Year Ended December 31,
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|
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2017
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|
2016
|
|
2015
|
|
|
|
(U.S. Dollars in thousands)
|
|
Purchase of flight equipment
|
|
$
|
3,956,671
|
|
|
$
|
2,892,731
|
|
|
$
|
2,772,110
|
|
|
Prepayments on flight equipment
|
|
1,268,585
|
|
|
947,419
|
|
|
791,546
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|
Business overview
Aircraft leasing
We are a global leader in aircraft leasing. We focus on acquiring in-demand aircraft at attractive prices, funding them efficiently, hedging
interest rate risk prudently and using our platform to deploy these assets with the objective of delivering superior risk-adjusted returns. We believe that by applying our expertise, we will be able
to identify and execute on a broad range of market opportunities that we expect will generate attractive returns for our shareholders. We are an independent aircraft lessor, and, as such, we are not
affiliated with any airframe or engine manufacturer. This independence provides us with purchasing flexibility to acquire aircraft or engine models regardless of the manufacturer.
We
operate our business on a global basis, leasing aircraft to customers in every major geographical region. As of December 31, 2017, we owned 980 aircraft and we managed 113
aircraft. As of December 31, 2017, we also had 438 new aircraft on order, including 222 Airbus A320neo Family aircraft, 104 Boeing 737MAX aircraft, 53 Boeing 787 aircraft,
50 Embraer E-Jets E2 aircraft, and nine Airbus A350 aircraft. As of December 31, 2017, the average age of our 980 owned aircraft fleet, weighted by net book value, was 6.8 years and as
of December 31, 2016, the average age of our 1,022 owned aircraft fleet, weighted by net book value, was 7.4 years.
We
have the infrastructure, expertise and resources to execute a large number of diverse aircraft transactions in a variety of market conditions. During the year ended
December 31, 2017, we executed 402 aircraft transactions. Our teams of dedicated marketing and asset trading professionals have been successful in leasing and managing our aircraft
portfolio. During the year ended December 31, 2017, our weighted average owned aircraft utilization rate was 99.1%, calculated based on the number of days each aircraft was on lease during the
year, weighted by the net book value of the aircraft.
Aircraft leases and transactions
We lease most of our aircraft to airlines under operating leases. Under these leases, the lessee is responsible for the maintenance and
servicing of the equipment during the lease term and the lessor receives the benefit, and assumes the risk, of the residual value of the equipment at the end of the lease. Rather than purchase all of
their aircraft, many airlines acquire aircraft under operating leases because this reduces their capital requirements and costs and allows them to manage their fleet more efficiently as aircraft are
returned over time. Since the 1970's and the creation of aircraft leasing pioneers Guinness Peat Aviation ("GPA") and ILFC, the world's airlines have increasingly turned to operating leases to meet
their aircraft needs. As of December 31, 2017, our owned and managed aircraft were leased to approximately 200 customers in approximately 80 countries. Over the life of our aircraft, we seek to
increase the returns on our investments by managing the lease rates, time off-lease and financing and maintenance costs, and by carefully timing their sale.
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Our
current operating aircraft leases have initial terms ranging in length up to approximately 16 years. By varying our lease terms, we mitigate the effects of changes in cyclical
market conditions at the time aircraft become eligible for re-lease.
Well
in advance of the expiration of an operating lease, we prioritize entering into a lease extension with the then-current operator. This reduces our risk of aircraft downtime as well
as aircraft transition costs. The terms of our lease extensions reflect the market conditions at the time and typically contain different terms from the original lease. Should a lessee not be
interested in extending a lease, or if we believe we can obtain a more favorable return on the aircraft, we will explore other options, including sale of the aircraft. If we enter into a lease
agreement for the same aircraft with a different lessee, we generally do so well in advance of the scheduled return date of the aircraft. When the aircraft is returned, there may be maintenance work
to be performed before the aircraft transitions to the next lessee. Upon redelivery, an aircraft is usually delivered to the next lessee in fewer than two months.
Our
extensive experience, global reach and operating capabilities allow us to rapidly complete numerous aircraft transactions, which enables us to increase the returns on our aircraft
investments by minimizing any time that our aircraft are not generating revenue for us. We successfully executed 402 aircraft transactions during the year ended December 31, 2017.
The
following table provides details regarding the aircraft transactions we executed during the years ended December 31, 2017, 2016 and 2015. The trends shown in the table reflect
the execution of the various elements of our leasing strategy for our owned and managed portfolio, as described further below:
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Year Ended December 31,
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|
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2017
|
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2016
|
|
2015
|
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Total
|
|
Owned portfolio
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|
|
|
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|
|
|
|
|
|
|
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New leases on new aircraft
|
|
59
|
|
|
72
|
|
|
56
|
|
|
187
|
|
|
New leases on used aircraft
|
|
51
|
|
|
75
|
|
|
108
|
|
|
234
|
|
|
Extensions of lease contracts
|
|
105
|
|
|
113
|
|
|
97
|
|
|
315
|
|
|
Aircraft purchases
|
|
58
|
|
|
38
|
|
|
46
|
|
|
142
|
|
|
Aircraft sales and part-outs
|
|
99
|
|
|
124
|
|
|
68
|
|
|
291
|
|
|
Managed portfolio
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|
|
|
|
|
|
|
|
|
|
|
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New leases on used aircraft
|
|
4
|
|
|
7
|
|
|
3
|
|
|
14
|
|
|
Extensions of lease contracts
|
|
11
|
|
|
12
|
|
|
12
|
|
|
35
|
|
|
Aircraft sales and part-outs
|
|
15
|
|
|
17
|
|
|
15
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
Total aircraft transactions
|
|
402
|
|
|
458
|
|
|
405
|
|
|
1,265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leases
of new aircraft generally have longer terms than used aircraft on re-lease. In addition, leases of more expensive aircraft generally have longer lease terms than those for less
expensive aircraft. Lease terms for owned aircraft tend to be longer than those for managed aircraft because the average age of our owned fleet is lower than that of our managed fleet.
Before
making any decision to lease an aircraft, we perform a review of the prospective lessee, which generally includes reviewing financial statements, business plans, cash flow
projections, maintenance capabilities, operational performance histories, hedging arrangements for fuel, foreign currency and interest rates and relevant regulatory approvals and documentation. We
perform on-site credit reviews for new lessees, which typically include extensive discussions with the prospective lessee's management before we enter into a new lease. We also evaluate the
jurisdiction in which the lessee operates to ensure we are in compliance with any regulations and evaluate our ability to repossess our assets in the event of a lessee default. Depending on the credit
quality and financial condition of the lessee, we may require the lessee to obtain guarantees or other financial support from an acceptable financial institution or other third parties.
We
typically require our lessees to provide a security deposit for their performance under their leases, including the return of the aircraft in the specified maintenance condition at
the expiration of the lease.
32
Table of Contents
All
of our lessees are responsible for the maintenance and repair of the leased aircraft as well as other operating costs during the lease term. Based on the credit quality of the
lessee, we require some of our lessees to pay supplemental maintenance rents to cover major scheduled maintenance costs. If a lessee pays supplemental maintenance rents, we reimburse them for their
maintenance costs up to the amount of their supplemental maintenance rent payments. Under the terms of our leases, at lease expiration, to the extent that a lessee has paid us more supplemental
maintenance rents than we have reimbursed them for their maintenance costs, we retain the excess rent. In most lease contracts that do not require the payment of supplemental maintenance rents, the
lessee is generally required to redeliver the aircraft in a similar maintenance condition (normal wear and tear excepted) as when accepted under the lease. To the extent that the redelivery condition
is different from the acceptance condition, we generally receive cash compensation for the value difference at the time of redelivery. As of December 31, 2017, 464 (approximately 47%) of
our 980 owned aircraft leases and as of December 31, 2016, 510 (approximately 50%) of our 1,022 owned aircraft leases, provided for the payment of supplemental maintenance rents.
In
all cases, we require the lessee to reimburse us for any costs we incur if the aircraft is not in the required condition upon redelivery. All of our leases contain provisions
regarding our remedies and rights in the event of default by the lessee, and also include specific provisions regarding the required condition of the aircraft upon its redelivery.
Our
lessees are also responsible for compliance with all applicable laws and regulations governing the leased aircraft and all related costs. We require our lessees to comply with either
the Federal Aviation Administration, European Aviation Safety Agency or their equivalent standards in other jurisdictions.
During
the term of our leases, some of our lessees have experienced financial difficulties resulting in the need to restructure their leases. Generally, our restructurings have involved
a number of possible changes to the lease terms, including the voluntary termination of leases prior to their scheduled expiration, the arrangement of subleases from the primary lessee to a sublessee,
the rescheduling of lease payments and the exchange of lease payments for other consideration, including shares and promissory notes. In some cases, we have been required to repossess a leased
aircraft and, in those cases, we have usually exported the aircraft from the lessee's jurisdiction to prepare it for remarketing. In the majority of these situations, we have obtained the lessee's
cooperation and the return and export of the aircraft were completed without significant delay, generally within two months. In some situations, however, our lessees have not cooperated in returning
aircraft and we have been required to take legal action. In connection with the repossession of an aircraft, we may be required to settle
claims on the aircraft or to which the lessee is subject, including outstanding liens on the repossessed aircraft.
33
Table of Contents
Scheduled lease expirations
The following table presents the scheduled lease expirations (for the minimum non-cancelable period, which does not include contracted
unexercised lease extension options) for our owned aircraft under operating leases by aircraft type as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft type
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
2026
|
|
2027
|
|
2028
|
|
2029
|
|
2030
|
|
2031
|
|
Total
|
|
Airbus A320 Family
|
|
41
|
|
|
69
|
|
|
74
|
|
|
55
|
|
|
34
|
|
|
38
|
|
|
19
|
|
|
11
|
|
|
|
|
|
4
|
|
|
6
|
|
|
1
|
|
|
|
|
|
|
|
|
352
|
|
|
Airbus A320neo Family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
14
|
|
|
27
|
|
|
1
|
|
|
4
|
|
|
47
|
|
|
Airbus A330
|
|
8
|
|
|
9
|
|
|
11
|
|
|
5
|
|
|
12
|
|
|
10
|
|
|
6
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62
|
|
|
Airbus A350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
6
|
|
|
7
|
|
|
|
|
|
|
|
|
15
|
|
|
Boeing 737NG
|
|
16
|
|
|
22
|
|
|
19
|
|
|
21
|
|
|
18
|
|
|
25
|
|
|
31
|
|
|
17
|
|
|
34
|
|
|
26
|
|
|
6
|
|
|
|
|
|
|
|
|
|
|
|
235
|
|
|
Boeing 767
|
|
7
|
|
|
11
|
|
|
6
|
|
|
4
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
Boeing 777-200ER
|
|
5
|
|
|
|
|
|
4
|
|
|
1
|
|
|
|
|
|
2
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
Boeing 777-300/300ER
|
|
7
|
|
|
10
|
|
|
2
|
|
|
1
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
3
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
|
|
|
Boeing 787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
6
|
|
|
4
|
|
|
13
|
|
|
12
|
|
|
6
|
|
|
14
|
|
|
|
|
|
2
|
|
|
62
|
|
|
Other
|
|
4
|
|
|
7
|
|
|
2
|
|
|
11
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (a)(b)
|
|
88
|
|
|
128
|
|
|
118
|
|
|
98
|
|
|
66
|
|
|
81
|
|
|
67
|
|
|
36
|
|
|
47
|
|
|
46
|
|
|
38
|
|
|
49
|
|
|
1
|
|
|
6
|
|
|
869
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
aircraft that have been re-leased or for which the lease has been extended.
-
(b)
-
Excludes
26 off-lease aircraft. As of March 2, 2018, 23 of the off-lease aircraft were re-leased or under commitments for re-lease and three aircraft were
designated for sale or part-out.
Principal markets and customers
The following table presents the percentage of lease revenue of our owned portfolio from our top five lessees for the year ended
December 31, 2017:
|
|
|
|
|
|
Lessee
|
|
Percentage of
2017
lease revenue
|
|
American Airlines
|
|
6.9 %
|
|
|
Emirates
|
|
4.7 %
|
|
|
Air France
|
|
4.6 %
|
|
|
China Southern Airlines
|
|
3.7 %
|
|
|
LATAM Airlines
|
|
3.6 %
|
|
|
|
|
|
|
Total
|
|
23.5 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
lease our aircraft to lessees located in numerous and diverse geographical regions. The following table presents the percentage of our lease revenue by region based on our lessee's
principal place of business for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Asia/Pacific/Russia
|
|
35 %
|
|
|
36 %
|
|
|
36 %
|
|
|
Europe
|
|
31 %
|
|
|
31 %
|
|
|
32 %
|
|
|
United States/Canada/Caribbean
|
|
14 %
|
|
|
14 %
|
|
|
14 %
|
|
|
Latin America
|
|
10 %
|
|
|
9 %
|
|
|
8 %
|
|
|
Africa/Middle East
|
|
10 %
|
|
|
10 %
|
|
|
10 %
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
100 %
|
|
|
100 %
|
|
|
100 %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
further geographic information on our lease revenue and long-lived assets, refer to Note 20
Geographic information
to our Consolidated Financial Statements included in this annual report.
34
Table of Contents
Aircraft services
We provide aircraft asset management and corporate services to securitization vehicles, joint ventures and other third parties. As of
December 31, 2017, we had aircraft management and administration and/or cash management service contracts with eight parties that owned 113 aircraft. We categorize our aircraft services into
aircraft asset management, administrative services and cash management services. Since we have an established operating system to manage our own aircraft, the incremental cost of providing aircraft
management services to securitization vehicles, joint ventures and third parties is limited. Our primary aircraft asset management activities include:
-
-
remarketing aircraft;
-
-
collecting rental and supplemental maintenance rent payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance and
accepting delivery and redelivery of aircraft;
-
-
conducting ongoing lessee financial performance reviews;
-
-
periodically inspecting the leased aircraft;
-
-
coordinating technical modifications to aircraft to meet new lessee requirements;
-
-
conducting restructuring negotiations in connection with lease defaults;
-
-
repossessing aircraft;
-
-
arranging and monitoring insurance coverage;
-
-
registering and de-registering aircraft;
-
-
arranging for aircraft and aircraft engine valuations; and
-
-
providing market research.
We
charge fees for our aircraft management services based on a mixture of fixed and rental-based amounts, but we also receive performance-based fees related to the managed aircraft lease
revenues or sale proceeds.
We
provide cash management and administrative services to securitization vehicles and joint ventures. Cash management services consist primarily of treasury services such as the
financing, refinancing, hedging and ongoing cash management of these vehicles. Our administrative services consist primarily of accounting and corporate secretarial services, including the preparation
of budgets and financial statements and, in the case of some securitization vehicles, liaising with the debt rating agencies.
Engine, parts and supply chain solutions
At the end of 2015, we decided to restructure and downsize the AeroTurbine business. Please refer to
Note 25
AeroTurbine restructuring
to our Consolidated Financial Statements included in this annual report for detail of the
AeroTurbine-related restructuring expenses we recorded during the years ended December 31, 2017, 2016 and 2015.
Prior
to the restructuring and downsizing, AeroTurbine provided engine leasing, certified aircraft engines, airframes, and engine parts, and supply chain solutions, and was capable of
disassembling aircraft and engines into parts. AeroTurbine sold airframe parts primarily to airlines, maintenance, repair and maintenance service providers, and aircraft parts distributors.
AeroTurbine also provided us with part-out and engine leasing capabilities.
35
Table of Contents
Our business strategy
We develop our aircraft leasing business by executing on our focused business strategy, the key components of which are as follows:
Manage the profitability of our aircraft portfolio
Manage the long-term profitability of our aircraft portfolio by selectively:
-
-
purchasing aircraft directly from manufacturers;
-
-
entering into purchase and leaseback transactions with aircraft operators;
-
-
using our global customer relationships to obtain favorable lease terms for aircraft and maximizing aircraft utilization;
-
-
maintaining diverse sources of global funding;
-
-
optimizing our portfolio by selling select aircraft; and
-
-
providing management services to securitization vehicles, our joint ventures and other aircraft owners at limited incremental cost to us.
Our
ability to profitably manage aircraft throughout their lifecycle depends in part on our ability to successfully source acquisition opportunities of new and used aircraft at favorable
terms, as well as secure long-term funding for such acquisitions, lease aircraft at profitable rates, minimize downtime between leases and associated technical expenses and opportunistically sell
aircraft.
Efficiently manage our liquidity
Our management analyzes sources of financing based on pricing and other terms and conditions in order to optimize the return on our investments.
We have the ability to access a broad range of liquidity sources globally. In 2017, we raised approximately $12.6 billion of financing, including through bank debt, revolving credit facilities
and note issuances in the debt capital markets.
We
have access to liquidity in the form of our revolving credit facilities and our term loan facilities, which provide us with flexibility in raising capital and enable us to deploy
capital rapidly to accretive purchasing opportunities that arise in the market. As of December 31, 2017, we had approximately $6.7 billion of undrawn lines of credit available under our
credit and term loan facilities and $1.7 billion of unrestricted cash. We strive to maintain a diverse financing strategy, both in terms of capital providers and structure, through the use of
bank debt, note issuance and export credit, including ECA guaranteed loans, in order to maximize our financial flexibility. We also leverage our longstanding relationships with the major aircraft
financers and lenders to secure access to capital. In addition, we attempt to maximize our operating cash flows and continue to pursue the sale of aircraft to generate additional cash flows. Please
refer to Note 15
Debt
to our Consolidated Financial Statements included in this annual report for a detailed description of our
outstanding indebtedness.
Manage our aircraft portfolio
We intend to maintain an attractive portfolio of in-demand aircraft by acquiring new aircraft directly from aircraft manufacturers, executing
purchase and leasebacks with airlines, assisting airlines with refleetings, and through other opportunistic transactions. We rely on our experienced team of portfolio management professionals to
identify and purchase assets we believe are being sold at attractive prices or that we believe will experience an increase in demand and value over a prolonged period of time. In addition, we intend
to continue to rebalance our aircraft portfolio through sales to maintain the appropriate mix of aviation assets by customer concentration, age and aircraft type.
36
Table of Contents
Maintain a diversified and satisfied customer base
We currently lease our owned and managed aircraft to approximately 200 customers in approximately 80 countries. We monitor our exposure
concentrations by both lessee and country jurisdiction and intend to maintain a well-diversified customer base. We believe we offer a quality product, both in terms of asset and customer service, to
all of our customers. We have successfully worked with many airlines to find mutually beneficial solutions to operational and financial challenges. We believe we maintain excellent relations with our
customers. We have been able to achieve a high utilization rate on our aircraft assets as a result of our customer reach, quality product offering and strong portfolio management capabilities.
Joint ventures
We conduct some of our business through joint ventures. The joint venture arrangements allow us to:
-
-
increase the geographical and product diversity of our portfolio;
-
-
obtain stable servicing revenues; and
-
-
diversify our exposure to the economic risks related to aircraft.
Please
refer to Note 27
Variable interest entities
to our Consolidated Financial Statements included in this annual
report for a detailed description of our joint ventures.
Relationship with Airbus and Boeing and other manufacturers
We are one of the largest customers of Airbus and Boeing measured by deliveries of aircraft through 2017 and our order backlog. We are also the
launch customer of the Embraer E2 program, with an order for 50 E-Jets E2 aircraft which are scheduled for entry into service in 2018. We are also among the largest purchasers of engines from each of
CFM International, GE Aviation, International Aero Engines, Pratt & Whitney and Rolls-Royce. These extensive manufacturer relationships and the scale of our business enable us to place large
orders with favorable terms and conditions, including pricing and delivery terms. In addition, these strategic relationships with manufacturers and market knowledge allow us to participate in new
aircraft designs, which gives us increased confidence in our airframe and engine selections. AerCap cooperates broadly with manufacturers seeking mutually beneficial opportunities, including
additional orders, purchasing selective new aircraft on short notice, and facilitating manufacturer targets by purchasing used aircraft from airlines seeking to renew their fleets.
Competition
The aircraft leasing and sales business is highly competitive. We face competition from aircraft manufacturers, financial institutions, other
leasing companies, aircraft brokers and airlines. Competition for a leasing transaction is based on a number of factors, including delivery dates, lease rates, term of lease, other lease provisions,
aircraft condition and the availability in the market place of the types of aircraft that can meet customer requirements. As a result of our geographical reach, diverse aircraft portfolio and success
in remarketing our aircraft, we believe we are a strong competitor in all of these areas. Our primary competitor is GE Capital Aviation Services, and we compete, to a lesser extent, with a number of
smaller aircraft leasing companies.
37
Table of Contents
Insurance
Our lessees are required under our leases to bear responsibility, through an operational indemnity subject to customary exclusions, and to carry
insurance for any liabilities arising out of the operation of our aircraft or engines, including any liabilities for death or injury to persons and damage to property that ordinarily would attach to
the operator of the aircraft.
In
addition, our lessees are required to carry other types of insurance that are customary in the air transportation industry, including hull all risks insurance for both the aircraft
and each engine whether or not installed on our aircraft, hull war risks insurance covering risks such as hijacking and terrorism and, where permitted, including confiscation, expropriation,
nationalization and seizure (in each case at a value stipulated in the relevant lease which typically exceeds the net book value by 10%, subject to adjustment or fleet aggregate limits in certain
circumstances). Our lessees are also required to carry aircraft spares insurance and aircraft third party liability insurance, in each case subject to customary deductibles and exclusions. We are
named as an additional insured on liability insurance policies carried by our lessees, and we or our lenders are designated as a loss payee in the event of a total loss of the aircraft or engine. We
monitor the compliance by our lessees with the insurance provisions of our leases by securing confirmation of coverage from the lessees' insurance brokers.
We
also purchase insurance which provides us with coverage when our aircraft or engines are not subject to a lease or where a lessee's policy fails to indemnify us. In addition, we carry
customary insurance for our property, which is subject to customary deductibles and exclusions. Insurance experts advise and make recommendations to us as to the appropriate amount of insurance
coverage that we should obtain.
38
Table of Contents
Regulation
While the air transportation industry is highly regulated, since we do not operate aircraft, we generally are not directly subject to most of
these regulations. Our lessees are subject, however, to extensive regulation under the laws of the jurisdictions in which they are registered and in which they operate. These regulations, among other
things, govern the registration, operation and maintenance of our aircraft and engines. Most of our aircraft are registered in the jurisdiction in which the lessee of the aircraft is certified as an
air operator. Both our aircraft and engines are subject to the airworthiness and other standards imposed by our lessees' jurisdictions of operation. Laws affecting the airworthiness of aviation assets
are generally designed to ensure that all aircraft, engines and related equipment are continuously maintained in proper condition to enable safe operation of the aircraft.
Most countries' aviation laws require aircraft and engines to be maintained under an approved maintenance program having defined procedures and intervals for inspection, maintenance and repair.
In
addition, under our leases, we may be required in some instances to obtain specific licenses, consents or approvals for different aspects of the leases. These required items include
consents from governmental or regulatory authorities for certain payments under the leases and for the import, re-export or deregistration of the aircraft and engines. Also, to perform some of our
cash management services and insurance services from Ireland under our management arrangements with our joint ventures and securitization entities, we are required to have a license from the Irish
regulatory authorities, which we have obtained.
Please
refer to "Item 3Risk FactorsRisks related to our businessWe are subject to various risks and requirements associated with transacting
business in many countries," "Item 3Risk FactorsRisks related to our businessOur ability to operate in some countries is restricted by foreign regulations
and controls on investments," "Item 3Risk FactorsRisks related to our businessOur aircraft are subject to various environmental regulations," and
"Item 3Risk FactorsRisks related to our businessOur operations are subject to various environmental regulations" for a detailed discussion of government
sanctions, export controls and other regulations that could affect our business.
Litigation
Please refer to Note 29
Commitments and contingencies
to our Consolidated
Financial Statements included in this annual report for a detailed description of material litigation to which we are a party.
Trademarks
We have registered the "AerCap" name with the European Union Intellectual Property Office ("EUIPO") and the United States Patent and Trademark
Office ("USPTO"), as well as filed the "AerCap" trademark with the World Intellectual Property Organization International (Madrid) Registry ("WIPO") and various local trademark authorities. The
"AeroTurbine" trademark has been registered with WIPO and USPTO.
Culture and values
At AerCap, we strive to conduct our business with integrity and in an honest and responsible manner and to build and maintain long-term,
mutually beneficial relationships with our customers, suppliers, shareholders, employees and other stakeholders. We shall similarly respect the legitimate interests of those with whom we have
relationships. In our business dealings we expect our partners to adhere to business principles consistent with our own. These values are further specified in our code of conduct and our
ethics-related compliance policies, procedures, trainings and programs. Ethical behavior is strongly promoted by the management team. The Company has an excellent track record in relation to ethics
and compliance. These ethical values are reflected in the Company's long-term strategy and our way of doing business.
39
Table of Contents
Sustainability and community
During 2017, the Board discussed and reviewed our approach to corporate social responsibility ("CSR") related topics and other values that
contribute to a culture focused on long-term value creation. Renewing our aircraft portfolio through the acquisition of new, modern technology aircraft while disposing of older aircraft has a positive
impact on the environment, as these new technology aircraft are more fuel-efficient and generate significantly less pollution and noise than older aircraft and engines. AerCap is committed to the
efficient use of resources and the reduction of unnecessary waste. Our head office in Dublin has been certified for sustainability pertaining to such matters as building materials, energy and water
use and accessibility. Our office buildings in Los Angeles and Singapore hold similar green building certifications.
AerCap
participates in a number of charitable events and industry related educational schemes. We have established a CSR Steering Committee to oversee the selection of charitable themes
and charity partners, and the implementation of charitable donations. A number of charitable donations involve the matching of funds raised through AerCap employee team efforts for the benefit of
local community projects. The Company, along with other major aircraft leasing companies, is a sponsor of a prestigious master's in aviation finance program at a renowned university. In addition to
the sponsorship, this program involves lectures by some of our key employees and internships provided by the Company to a number of international students from the program, in line with the global
nature and identity of the Company and our business.
Flight equipment
Aircraft portfolio
The following table presents our aircraft portfolio by type of aircraft as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft type
|
|
Number of
owned
aircraft
|
|
Percentage of
total
net book value
|
|
Number of
managed
aircraft
|
|
Number of on
order aircraft
|
|
Total owned,
managed and
on
order aircraft
|
|
Airbus A320 Family
|
|
370
|
|
|
21%
|
|
|
52
|
|
|
|
|
|
422
|
|
|
Airbus A320neo Family
|
|
48
|
|
|
7%
|
|
|
|
|
|
222
|
|
|
270
|
|
|
Airbus A330
|
|
83
|
|
|
11%
|
|
|
10
|
|
|
|
|
|
93
|
|
|
Airbus A350
|
|
17
|
|
|
7%
|
|
|
|
|
|
9
|
|
|
26
|
|
|
Boeing 737NG
|
|
274
|
|
|
22%
|
|
|
43
|
|
|
|
|
|
317
|
|
|
Boeing 737MAX
|
|
|
|
|
|
|
|
|
|
|
104
|
|
|
104
|
|
|
Boeing 767
|
|
34
|
|
|
1%
|
|
|
|
|
|
|
|
|
34
|
|
|
Boeing 777-200ER
|
|
23
|
|
|
2%
|
|
|
2
|
|
|
|
|
|
25
|
|
|
Boeing 777-300/300ER
|
|
29
|
|
|
6%
|
|
|
2
|
|
|
|
|
|
31
|
|
|
Boeing 787
|
|
63
|
|
|
22%
|
|
|
|
|
|
53
|
|
|
116
|
|
|
Embraer E190/195-E2
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
50
|
|
|
Other
|
|
39
|
|
|
1%
|
|
|
4
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
980
|
|
|
100%
|
|
|
113
|
|
|
438
|
|
|
1,531
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40
Table of Contents
During
the year ended December 31, 2017, we had the following activity related to flight equipment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held for
operating
leases
|
|
Net investment
in
finance and
sales-
type leases
|
|
Held for
sale
|
|
Total
owned
aircraft
|
|
|
Number of owned aircraft at beginning of period
|
|
966
|
|
|
50
|
|
|
6
|
|
|
1,022
|
|
|
|
Aircraft purchases
|
|
58
|
|
|
|
|
|
|
|
|
58
|
|
|
|
Aircraft reclassified to held for sale
|
|
(69
|
)
|
|
(1
|
)
|
|
70
|
|
|
|
|
|
|
Aircraft reclassified from held for sale
|
|
3
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
|
Aircraft sold or designated for part-out
|
|
(44
|
)
|
|
(1
|
)
|
|
(55
|
)
|
|
(100
|
)
|
|
(a)
|
Aircraft reclassified to net investment in finance and sales-type leases
|
|
(19
|
)
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of owned aircraft at end of period
|
|
895
|
|
|
67
|
|
|
18
|
|
|
980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
one aircraft that was reclassified to spare inventory.
Aircraft on order
The following table details the number of aircraft on order as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft type
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Airbus A320neo Family
|
|
53
|
|
|
42
|
|
|
47
|
|
|
30
|
|
|
25
|
|
|
25
|
|
|
222
|
|
|
Airbus A350
|
|
7
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
Boeing 737MAX
|
|
5
|
|
|
17
|
|
|
27
|
|
|
28
|
|
|
27
|
|
|
|
|
|
104
|
|
|
Boeing 787
|
|
13
|
|
|
14
|
|
|
5
|
|
|
6
|
|
|
6
|
|
|
9
|
|
|
53
|
|
|
Embraer E190/195-E2
|
|
1
|
|
|
14
|
|
|
14
|
|
|
14
|
|
|
7
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
79
|
|
|
89
|
|
|
93
|
|
|
78
|
|
|
65
|
|
|
34
|
|
|
438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aircraft acquisitions and dispositions
We purchase new and used aircraft directly from aircraft manufacturers, airlines, financial investors and other aircraft leasing and finance
companies. The aircraft we purchase are both on-lease and off-lease, depending on market conditions and the composition of our portfolio. The buyers of our aircraft include airlines, financial
investors and other aircraft leasing companies. We acquire aircraft at attractive prices in three primary ways: by purchasing large quantities of aircraft directly from manufacturers to take advantage
of volume discounts, by purchasing portfolios consisting of aircraft of varying types and ages and by entering into purchase and leaseback transactions with airlines. In addition, we also
opportunistically purchase individual aircraft that we believe are being sold at attractive prices, or that we expect will experience an increase in demand. Through our airline marketing team, which
is in frequent contact with airlines worldwide, we are also able to identify attractive acquisition and disposition opportunities. We sell aircraft when we believe the market price for the type of
aircraft has reached its peak, or to rebalance the composition of our portfolio.
Prior
to a purchase or disposition, our dedicated portfolio management group analyzes the aircraft's price, fit in our portfolio, specification and configuration, maintenance history and
condition, the existing lease terms, financial condition and creditworthiness of the existing lessee, the jurisdiction of the lessee, industry trends, financing arrangements and the aircraft's
redeployment potential and value, among other factors. During the year ended December 31, 2017, we purchased 58 new aircraft and sold 99 aircraft from our owned portfolio.
41
Table of Contents
Facilities
We lease our Dublin, Ireland headquarters office facility under a 25-year lease (61,000 square feet) that began in December 2015. We have an
option to terminate the lease in 2031. We lease our Shannon, Ireland office facility (21,000 square feet) under three separate leases that expire in 2029 with options to terminate in 2024. We occupy
space in Los Angeles, California (21,000 square feet) under a lease that expires in August 2025. We lease our Singapore office facility under two leases that expire in December 2018 (17,000 square
feet). We lease office facilities in Amsterdam, The Netherlands and Fort Lauderdale, Florida under leases that expire in 2018 and 2019, respectively, which are not planned to be extended. In addition
to the above facilities, we also lease small offices in New York, New York, Miami, Florida, Shanghai, China and Abu Dhabi, United Arab Emirates.
Organizational structure
AerCap Holdings N.V. is a holding company that holds directly and indirectly consolidated subsidiaries, which in turn own our aircraft
assets. As of December 31, 2017, AerCap Holdings N.V. did not own significant assets other than its direct and indirect investments in its subsidiaries. As of December 31, 2017,
our major operating subsidiaries, each of which is ultimately 100%-owned by AerCap Holdings N.V., are AerCap Ireland Limited (Ireland) and AerCap Global Aviation Trust (United States). See
Exhibit 8.1
List of Subsidiaries of AerCap Holdings N.V.
for a complete list of all our subsidiaries.
Item 4A. Unresolved Staff Comments
Not applicable.
Item 5. Operating and Financial Review and Prospects
You should read this discussion in conjunction with our audited Consolidated Financial Statements and the related notes
included in this annual report. Our financial statements are presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The discussion
below contains forward looking statements that are based upon our current expectations and are subject to uncertainty and changes of circumstances. See "Item 3. Key InformationRisk
Factors" and "Special Note About Forward Looking Statements."
Overview
Net income attributable to AerCap Holdings N.V. for the year ended December 31, 2017 was $1,076.2 million, as compared to
$1,046.6 million for the year ended December 31, 2016. For the year ended December 31, 2017, diluted earnings per share was $6.43 and the weighted average number of diluted shares
outstanding was 167,287,508. Net interest margin, or net spread, the difference between basic lease rents and interest expense, excluding the mark-to-market of interest rate caps and swaps, was
$3,096.0 million for the year ended December 31, 2017. Please refer to "Item 5. Operating and Financial Review and ProspectsNon-GAAP measures" for a reconciliation of
net interest margin, or net spread, to the most closely related U.S. GAAP measure for the years ended December 31, 2017 and 2016.
42
Table of Contents
Major developments in 2017
-
-
In January 2017, AerCap executed the placement of 20 new Airbus A320neo aircraft with Chinese carrier Loong Air.
-
-
In January 2017, AerCap Trust and AICDC co-issued $600 million aggregate principal amount of 3.50% senior unsecured notes due 2022.
-
-
In February 2017, AerCap was upgraded to investment grade rating by Moody's, resulting in AerCap having investment grade ratings from all three
major rating agencies.
-
-
In February 2017, AerCap's Board of Directors approved a new $350 million share repurchase program. This share repurchase program was
completed on June 12, 2017.
-
-
In May 2017, AerCap's Board of Directors approved a new $300 million share repurchase program. This share repurchase program was
completed on September 26, 2017.
-
-
In June 2017, AerCap and Boeing announced an order for 30 Boeing 787-9 Dreamliners, making AerCap the largest customer for the 787 Dreamliner.
-
-
In July 2017, AerCap executed the placement of ten Airbus A321neo LR aircraft to North American carrier Air Transat. The airline will become
the first North American operator of the Airbus A321neo LR when the aircraft enter into service starting in 2019.
-
-
In July 2017, AerCap Trust and AICDC co-issued $1.0 billion aggregate principal amount of 3.65% senior unsecured notes due 2027.
-
-
In July 2017, AerCap's Board of Directors approved a new $250 million share repurchase program. This share repurchase program was
completed on December 14, 2017.
-
-
In August 2017, AerCap executed the placement of five Embraer E190-E2 Jets to Air Astana, the national carrier of Kazakhstan.
-
-
In October 2017, AerCap's Board of Directors approved a new $200 million share repurchase program. This share repurchase program was
completed on February 21, 2018.
-
-
In November 2017, AerCap and Egyptian carrier EgyptAir reached agreement on the placement of 15 Airbus A320neo aircraft and six
Boeing 787-9 aircraft.
-
-
In November 2017, AerCap Trust and AICDC co-issued $800 million aggregate principal amount of 3.50% senior unsecured notes due 2025.
-
-
In December 2017, AerCap exercised options to purchase 50 Airbus A320neo Family aircraft from Airbus, with deliveries starting from 2022.
-
-
In December 2017, AerCap announced an agreement to invest in Peregrine, a vehicle established by NCB Capital for the purpose of acquiring a
portfolio of 21 aircraft from AerCap. AerCap will have a 9.5% investment in Peregrine.
-
-
During 2017, AerCap executed aggregate sales of approximately $2.4 billion of older and mid-life aircraft.
Aviation assets
During the year ended December 31, 2017, we acquired $5.3 billion of aviation assets, primarily related to the acquisition of 58
aircraft. As of December 31, 2017, we owned 980 aircraft and we managed 113 aircraft. As of December 31, 2017, we also had 438 new aircraft on order, which included 222 Airbus A320neo
Family aircraft, 104 Boeing 737MAX aircraft, 53 Boeing 787 aircraft, 50 Embraer E-Jets E2 aircraft, and nine Airbus A350 aircraft. The average age of our fleet of 980 owned aircraft,
weighted by net book value, was 6.8 years as of December 31, 2017.
43
Table of Contents
Significant components of revenues and expenses
Revenues and other income
Our revenues and other income consist primarily of lease revenue from aircraft leases, net gain on sale of assets and other income.
Lease revenue
Nearly all of our aircraft lease agreements provide for the periodic payment of a fixed or a floating amount of rent. Floating rents are tied to
interest rates during the terms of the respective leases. During the year ended December 31, 2017, approximately 4.9% of our basic lease rents from aircraft under operating leases was
attributable to leases tied to floating interest rates. In limited circumstances, our leases may require a basic rental payment based partially or exclusively on the amount of usage during a period.
In addition, our leases require the payment of supplemental maintenance rent based on aircraft utilization during the lease term, or EOL compensation calculated with reference to the condition of the
aircraft at lease expiration. The amount of lease revenue we recognize is primarily influenced by the following five factors:
-
-
the contracted lease rate, which is highly dependent on the age, condition and type of the leased aircraft;
-
-
for leases with rates tied to floating interest rates, interest rates during the term of the lease;
-
-
the number of aircraft currently subject to lease contracts;
-
-
the lessee's performance of its lease obligations; and
-
-
the amount of EOL compensation payments we receive and the amount of accrued maintenance liabilities recognized as revenue during and at the
end of a lease.
In
addition to aircraft-specific factors such as the type, condition and age of the aircraft, the lease rates for our leases with fixed rental payments are initially determined in part
by reference to the prevailing interest rate for a debt instrument with a term similar to the lease term and with a similar credit quality as the lessee at the time we enter into the lease. Many of
the factors described above are influenced by global and regional economic trends, airline market conditions, the supply and demand balance for the type of aircraft we own and our ability to remarket
our aircraft subject to expiring lease contracts under favorable economic terms.
As
of December 31, 2017, 954 of our 980 owned aircraft were on lease to 173 customers in 73 countries, with no lessee accounting for more than 10% of total lease revenue
for the year ended December 31, 2017. As of December 31, 2017, our owned aircraft portfolio included 26 aircraft that were off-lease; all of these off-lease aircraft were classified as
held for operating leases. As of March 2, 2018, 23 of the off-lease aircraft were re-leased or under commitments for re-lease and three aircraft were designated for sale or part-out.
Net gain on sale of assets
Our net gain on sale of assets is generated from the sale of our aircraft and engines and is largely dependent on the condition of the asset
being sold, prevailing interest rates, airline market conditions and the supply and demand balance for the type of asset we are selling. The timing of aircraft and engine sale closings is often
uncertain, as a sale may be concluded swiftly or negotiations may extend over several weeks or months. As a result, even if net gain on sale of assets is
comparable over a long period of time, during any particular reporting period we may close significantly more or fewer sale transactions than in other reporting periods. Accordingly, net gain on sale
of assets recorded in one reporting period may not be comparable to net gain on sale of assets in other reporting periods.
44
Table of Contents
Other income
Other income consists of interest revenue, management fee revenue, lease termination penalties, inventory part sales, net gain on sale of equity
investments accounted for under the equity method, insurance proceeds, and other miscellaneous activities.
Our
interest revenue is derived primarily from interest on unrestricted and restricted cash balances and on financial instruments we hold, such as subordinated debt investments in
unconsolidated securitization vehicles or affiliates. The amount of interest revenue we recognize in any period is influenced by our unrestricted or restricted cash balances, the principal balance of
financial instruments we hold, contracted or effective interest rates, and movements in provisions for financial instruments which can affect adjustments to valuations or provisions.
We
generate management fee revenue by providing management services to non-consolidated aircraft securitization vehicles, joint ventures, and other third parties. Our management services
include aircraft asset management services, such as leasing and remarketing services and technical advisory services, cash management and treasury services, and accounting and administrative services.
Operating expenses
Our operating expenses consist primarily of depreciation and amortization, interest expense, leasing expenses and selling, general and
administrative expenses.
Depreciation and amortization
Our depreciation expense is influenced by the adjusted gross book values, depreciable lives and estimated residual values of our flight
equipment. Adjusted gross book value is the original cost of our flight equipment, including purchase expenditures, adjusted for subsequent capitalized improvements, impairments and accounting basis
adjustments associated with a business combination or a purchase and leaseback transaction. In addition, we have definite-lived intangible assets which are amortized over the period which we expect to
derive economic benefits from such assets.
Interest expense
Our interest expense arises from a variety of debt funding structures and related derivative financial instruments as described in
"Item 11Quantitative and Qualitative Disclosures About Market Risk," Note 12
Derivative assets
and
Note 15
Debt
to our Consolidated Financial Statements included in this annual report. Interest expense in any period is primarily
affected by contracted interest rates, amortization of fair value adjustments, amortization of debt issuance costs and debt discounts, principal amounts of indebtedness and unrealized mark-to-market
gains or losses on derivative financial instruments for which we did not achieve cash flow hedge accounting treatment.
Leasing expenses
Our leasing expenses consist primarily of maintenance rights intangible asset amortization expense, maintenance expenses on our flight
equipment, which we incur during the lease through lessor maintenance contributions or when we perform maintenance on our off-lease aircraft, technical expenses we incur to monitor the maintenance
condition of our flight equipment during a lease, expenses to transition flight equipment from an expired lease to a new lease contract, non-capitalizable flight equipment transaction expenses, and
provision for credit losses on notes receivables, trade receivables and receivables from net investment in finance and sales-type leases.
45
Table of Contents
Maintenance
rights intangible assets are recognized when we acquire aircraft subject to existing leases. These intangible assets represent the contractual right to receive the aircraft
in a specified maintenance condition at the end of the lease under EOL contracts or our right to receive an aircraft in better maintenance condition due to our obligation to contribute towards the
cost of the maintenance events performed by the lessee either through reimbursement of maintenance deposit rents held under MR contracts, or through a lessor contribution to the lessee.
For
EOL contracts, upon lease termination, we recognize receipts of EOL cash compensation as lease revenue in our Consolidated Income Statements to the extent those receipts exceed the
EOL contract maintenance rights intangible asset and we recognize leasing expenses in our Consolidated Income Statements when the EOL contract maintenance rights intangible asset exceeds the EOL cash
receipts. For MR contracts, we recognize maintenance rights expense at the time the lessee submits a reimbursement claim and provides the required documentation related to the cost of a qualifying
maintenance event that relates to pre-acquisition usage.
Selling, general and administrative expenses
Our selling, general and administrative expenses consist primarily of personnel expenses, including salaries, benefits and severance
compensation, share-based compensation expense, professional and advisory costs, office facility expenses and travel expenses as summarized in
Note 21
Selling, general and administrative expenses
to our Consolidated Financial Statements included in this annual report. The
level of our selling, general and administrative expenses is influenced primarily by the number of our employees and the extent of transactions or ventures we pursue that require the assistance of
outside professionals or advisors.
Provision for income taxes
Our operations are taxable primarily in the three main jurisdictions in which we manage our business: Ireland, the United States and the
Netherlands. Deferred income taxes are provided to reflect the impact of temporary differences between our U.S. GAAP income before income
taxes and our taxable income. Our effective tax rate has varied from year to year. The primary source of temporary differences is the availability of accelerated tax depreciation in our primary
operating jurisdictions. Our effective tax rate in any year depends on the tax rates in the jurisdictions from which our income is derived, along with the extent of permanent differences between
U.S. GAAP income before income taxes and taxable income.
We
have tax losses in certain jurisdictions that can be carried forward, which we recognize as deferred income tax assets. We evaluate the recoverability of deferred income tax assets in
each jurisdiction in each period based upon our estimates of future taxable income in these jurisdictions. If we determine that we are not likely to generate sufficient taxable income in a
jurisdiction prior to expiration, if any, of the availability of tax losses, we establish a valuation allowance against the tax loss to reduce the deferred income tax asset to its recoverable value.
We evaluate the appropriate level of valuation allowances annually and make adjustments as necessary. Increases or decreases to valuation allowances can affect our provision for income taxes in our
Consolidated Income Statements and consequently may affect our effective tax rate in a given year.
46
Table of Contents
Factors affecting our results
Our results of operations have also been affected by a variety of other factors, primarily:
-
-
the number, type, age and condition of the aircraft we own;
-
-
aviation industry market conditions, including general economic and political conditions;
-
-
the demand for our aircraft and the resulting lease rates we are able to obtain for our aircraft;
-
-
the availability and cost of debt capital to finance purchases of aircraft and aviation assets;
-
-
the purchase price we pay for our aircraft;
-
-
the number, type and sale price of aircraft, or parts in the event of a part-out of an aircraft, we sell in a period;
-
-
the ability of our lessees to meet their lease obligations and maintain our aircraft in airworthy and marketable condition;
-
-
the utilization rate of our aircraft;
-
-
the recognition of non-cash share-based compensation expense related to the issuance of restricted stock units or restricted stock;
-
-
our expectations of future maintenance reimbursements and lessee maintenance contributions;
-
-
interest rates, which affect our aircraft lease revenues, our interest expense and the market value of our interest rate derivatives; and
-
-
our ability to fund our business.
Factors affecting the comparability of our results
Share repurchases
During 2017, our Board of Directors authorized total repurchases of up to $1.1 billion of AerCap ordinary shares and we repurchased an
aggregate of 23,732,835 of our ordinary shares under our share repurchase programs at an average price, including commissions, of $47.39 per ordinary share, for approximately $1.1 billion.
During
2016, our Board of Directors authorized total repurchases of up to $1.15 billion of AerCap ordinary shares and we repurchased an aggregate of 25,012,978 of our ordinary
shares under our share repurchase programs at an average price, including commissions, of $38.62 per ordinary share, for approximately $966.0 million.
Sales transactions
During 2017, AerCap executed aggregate sales of approximately $2.4 billion of older and mid-life aircraft.
During
2016, AerCap executed aggregate sales of approximately $3.0 billion of older and mid-life aircraft.
47
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Trends in our business
Global demand for air travel remains strong. Overall global air passenger traffic, measured in revenue passenger kilometers, grew 7.6% in 2017,
according to IATA. Traffic growth was 8.2% in Europe, 4.2% in North America, and 10.1% in Asia Pacific in 2017, propelled again by strong 13.3% domestic growth in China and 17.5% domestic traffic
growth in India. The demand stimulus from lower airfares is expected to fade during 2018, with traffic growth forecast to slow to 6% in 2018, according to IATA. This remains above the ten-year average
of 5.5% and is still expected to translate into robust growth in large, developed markets, such as the U.S. and Europe, as well as continued rapid expansion in emerging markets where the middle class
continues to expand.
The
industry is expected to remain solidly profitable and is expected to record a net profit of $38.4 billion in 2018, the ninth year in a row of aggregate airline profitability.
Passenger
air traffic growth and airlines' continued profitability have driven steady demand for commercial passenger aircraft from airlines, including demand for leased aircraft. We
expect that demand for leased aircraft will remain strong as robust traffic growth continues to drive demand for additional aircraft.
Critical accounting policies and estimates
Our Consolidated Financial Statements are prepared in accordance with U.S. GAAP, and require us to make estimates and assumptions that
affect the amounts reported in our Consolidated Financial Statements and accompanying notes. The use of estimates is or could be a significant factor affecting the reported amounts of assets,
liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities. We evaluate our estimates and assumptions, including those related to flight equipment, inventory, lease
revenue, fair value estimates, and income taxes, on a recurring and non-recurring basis. Our estimates and assumptions are based on historical experiences and currently available information that
management believes to be reasonable under the circumstances. Actual results may differ from our estimates under different conditions, sometimes materially. A summary of our significant accounting
policies is presented in Note 3
Summary of significant accounting policies
to our Consolidated Financial Statements included in this
annual report. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of our financial condition and results of operations and that require our
judgments, estimates and assumptions. Our critical accounting policies and estimates are described below.
Flight equipment held for operating leases, net
Flight equipment held for operating leases is stated at cost less accumulated depreciation and impairment. Flight equipment is depreciated to
its estimated residual value on a straight-line basis over the useful life of the aircraft, which is generally 25 years from the date of manufacture, or a different period depending on the
disposition strategy. The costs of improvements to flight equipment are normally recorded as leasing expenses unless the improvement increases the long-term value or extends the useful life of the
flight equipment. The capitalized improvement cost is depreciated over the estimated remaining useful life of the aircraft. The residual value of our flight equipment is generally 15% of estimated
industry standard price, except where more relevant information indicates a different residual value is more appropriate.
We
periodically review the estimated useful lives and residual values of our flight equipment based on our knowledge of the industry, external factors, such as current market conditions,
and changes in our disposition strategies, to determine if they are appropriate, and record adjustments to depreciation rates prospectively on an aircraft by aircraft basis, as necessary.
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Impairment charges
On a quarterly basis, we perform recoverability assessments of our long-lived assets when events or changes in circumstances indicate that the
carrying value of such assets may not be recoverable, such as when events or changes in circumstances indicate that it is more likely than not that an aircraft will be sold or parted-out a significant
amount of time before the end of its previously estimated useful life. Due to the significant uncertainties associated with potential sales transactions, management uses its judgment to evaluate
whether a sale or other disposal is more likely than not. The factors that management considers in its assessment include
(i)
the progress of the
potential sales transactions through a review and evaluation of the sales related documents and other communications, including, but not limited to, letters of intent or sales agreements that have
been negotiated or executed;
(ii)
our general or specific fleet strategies and other business needs and how those requirements bear on the
likelihood of sale or other disposal; and
(iii)
the evaluation of potential execution risks, including the source of potential purchaser funding
and other execution risks.
On
an annual basis, we perform impairment assessments for all of our aircraft held for operating leases that are five years of age or older. The review of recoverability includes an
assessment of the estimated future cash flows associated with the use of the asset and its eventual disposal. The assets are grouped at the lowest level for which identifiable cash flows are largely
independent of other groups of assets, which includes the individual aircraft and the lease-related assets and liabilities of that aircraft (the "Asset Group"). If the sum of the expected undiscounted
future cash flows is less than the aggregate net book value of the Asset Group, an impairment loss is recognized. The loss is measured as the excess of the carrying amount of the impaired aircraft
over its estimated fair value. Fair value reflects the present value of future cash flows expected to be generated from the aircraft, including its expected residual value, discounted at a rate
commensurate with the associated risk. Future cash flows are assumed to occur under current market conditions and assume adequate time for a sale between a willing buyer and a willing seller. Expected
future lease rates are based on all relevant information available, including current contracted rates for similar aircraft and industry trends.
The
future cash flows supporting the carrying value of aircraft that are 15 years of age or older are more dependent upon current lease contracts, and these leases are generally
more sensitive to weaknesses in the global economic environment. Deterioration of the global economic environment and a decrease in aircraft values might have a negative effect on the undiscounted
cash flows of older aircraft and might trigger impairments. As of December 31, 2017, we owned 895 aircraft held for operating leases, of which 173 aircraft were 15 years of age or
older. As of December 31, 2017, the aggregate Asset Group for the 173 aircraft was $1.9 billion, which represented approximately 6% of our total flight equipment and lease-related
assets and liabilities. The undiscounted future cash flows of these 173 aircraft were estimated at $3.3 billion, which was 76% in excess of the aggregate carrying value. As of
December 31, 2017, all of these aircraft passed the recoverability test, with undiscounted cash flows exceeding the carrying value of the Asset Group by between 0% and over 3,000%. The
following assumptions drive the undiscounted cash flows: contracted lease rents through current lease expiry; subsequent re-lease rates based on current marketing information; and residual values. We
review and stress-test our key assumptions to reflect any observed weakness in the global economic environment.
Aircraft
that are between five and 15 years of age where future cash flows do not exceed the aircraft carrying value by at least 10% are more susceptible to impairment risk. As of
December 31, 2017, the aggregate Asset Group for one aircraft for which the cash flows did not substantially exceed our 10% threshold was $21.6 million, which represented less than 1% of
our total flight equipment held for operating leases and lease-related assets and liabilities. The one aircraft that was below the 10% threshold did, however, pass the impairment test as of
December 31, 2017, and as such no impairment was recognized.
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Guarantees
We have potential obligations under guarantee contracts that we have entered into with third parties. See
Note 29
Commitments and contingencies
. We initially recognize guarantees at fair value. Subsequently, if it becomes probable that we
will be required to perform under a guarantee, we accrue a liability based on an estimate of the loss we will incur to perform under the guarantee. The loss estimate is generally measured as the
amount by which the contractual guaranteed value exceeds the fair market value or future lease cash flows of the underlying aircraft.
Inventory
Inventory consists primarily of engine and airframe components and piece parts and is included in other assets in our Consolidated Balance
Sheets. We value our inventory at the lower of cost and net realizable value. Generally, inventory that is held for more than four years is considered excess inventory and its carrying value is
reduced to zero.
Revenues and other income
We lease flight equipment principally under operating leases and recognize rental income on a straight-line basis over the life of the lease. At
lease inception, we review all necessary criteria to determine proper lease classification. We account for lease agreements that include uneven rental payments on a straight line-basis. The difference
between rental revenue recognized and cash received is included in our Consolidated Balance Sheets in other assets or, in the event it is a liability, in accounts payable, accrued expenses and other
liabilities. In certain cases, leases provide for rentals contingent on usage. The usage may be calculated based on hourly usage or on the number of cycles operated, depending on the lease contract.
Revenue contingent on usage is recognized at the time the lessee reports the usage to us. We cease revenue recognition on a lease contract when the collectability of such rentals is no longer
reasonably assured. For past-due rentals that exceed related security deposits held, which have been recognized as revenue, we establish provisions on the basis of management's assessment of
collectability. Such provisions are recorded in leasing expenses in our Consolidated Income Statements.
Revenue
from net investment in finance and sales-type leases is recognized using the interest method to produce a constant yield over the life of the lease and is included in lease
revenue in our Consolidated Income Statements. Expected unguaranteed residual values of leased flight equipment are based on our assessment of the values of the leased flight equipment at expiration
of the lease terms.
Under
our aircraft leases, the lessee is responsible for maintenance, repairs and other operating expenses during the term of the lease. Under the provisions of many of our leases, the
lessee is required to make payments of supplemental maintenance rents which are calculated with reference to the utilization of the airframe, engines and other major life-limited components during the
lease. We record as lease revenue all supplemental maintenance rent receipts not expected to be reimbursed to lessees. We estimate the total amount of maintenance reimbursements for the entire lease
and only record revenue after we have received sufficient maintenance rents under a particular lease to cover the total amount of estimated maintenance reimbursements during the remaining lease term.
In
most lease contracts not requiring the payment of supplemental maintenance rents, and to the extent that the aircraft is redelivered in a different condition than at acceptance, we
generally receive EOL cash compensation for the difference at redelivery. Upon lease termination, we recognize receipts of EOL cash compensation as lease revenue in our Consolidated Income Statements
to the extent those receipts exceed the EOL contract maintenance rights intangible asset and we recognize leasing expenses in our Consolidated Income Statements when the EOL contract maintenance
rights intangible asset exceeds the EOL cash receipts.
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When
flight equipment is sold, the portion of the accrued maintenance liability not specifically assigned to the buyer is released net of any maintenance rights intangible asset balance
and is included in net gain on sale of assets in our Consolidated Income Statements.
Consolidation
We consolidate all companies in which we have direct and indirect legal or effective control and all VIEs for which we are deemed the PB and
have control under ASC 810. All intercompany balances and transactions with consolidated subsidiaries have been eliminated. The results of consolidated entities are included from the effective date of
control or, in the case of VIEs, from the date that we are or become the PB. The results of subsidiaries sold or otherwise deconsolidated are excluded from the date that we cease to control the
subsidiary or, in the case of VIEs, when we cease to be the PB.
Deferred income tax assets and liabilities
We report deferred income taxes resulting from the temporary differences between the book values and the tax values of assets and liabilities
using the liability method. The differences are calculated at nominal value using the enacted tax rate applicable at the time the temporary difference is expected to reverse. Deferred income tax
assets attributable to unutilized losses carried forward or other timing differences are reduced by a valuation allowance if it is more likely than not that such losses will not be utilized to offset
future taxable income.
Future application of accounting standards
Revenue from contracts with customers
In May 2014, the FASB issued an accounting standard that provides a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This guidance does not apply to lease contracts with customers.
The standard will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract including
(i)
identifying the contract with the customer;
(ii)
identifying the separate performance
obligations in the contract;
(iii)
determining the transaction price;
(iv)
allocating the
transaction price to the separate performance obligations; and
(v)
recognizing revenue when each performance obligation is satisfied.
This
standard is effective for fiscal years beginning after December 15, 2017 and may be adopted using either a full retrospective or modified retrospective method. We will adopt
the standard on its required effective date of January 1, 2018, using the modified retrospective method. The impact of this standard will not be material to our Consolidated Financial
Statements and related disclosures.
Lease accounting
In February 2016, the FASB issued an accounting standard that requires lessees to recognize lease-related assets and liabilities on the balance
sheet, other than leases that meet the definition of a short-term lease. In certain circumstances, the lessee is required to remeasure the lease payments. Qualitative and quantitative disclosures,
including significant judgments made by management, will be required to provide insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. Under
the new standard, lessor accounting remains similar to the current model. The new standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years. Early adoption is permitted. The new standard must be adopted using the modified retrospective transition approach. We will adopt the standard on its required effective date of
January 1, 2019. We do not expect the impact of this standard to be material to our Consolidated Balance Sheets and Consolidated Income Statements.
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Allowance for credit losses
In June 2016, the FASB issued an accounting standard that requires entities to estimate lifetime expected credit losses for most financial
assets measured at amortized cost and certain other instruments, including trade and other receivables, net investments in leases and off-balance sheet credit exposures. The standard also requires
additional disclosure, including how the entity develops its allowance for credit losses for financial assets measured at amortized cost and disaggregated information on the credit quality of net
investments in leases measured at amortized cost by year of the asset's origination for up to five annual periods. The standard is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. Early adoption will be permitted in any interim or annual period beginning after December 15, 2018. The new standard must be adopted using
the modified retrospective transition approach. We will adopt the standard on its required effective date of January 1, 2020. We are evaluating the effect the adoption of the standard will have
on our Consolidated Balance Sheets and Consolidated Income Statements.
Statement of cash flows
In August 2016, the FASB issued an accounting standard that is intended to reduce diversity in practice in how certain transactions are
classified in the statement of cash flows. The standard includes clarifications that
(i)
cash payments for debt prepayment or extinguishment
costs must be classified as cash outflows for financing activities;
(ii)
cash proceeds from the settlement of insurance claims should be
classified based on the nature of the loss;
(iii)
an entity is required to make an accounting policy election to classify distributions received
from equity method investees under either the cumulative-earnings approach or the nature of distribution approach; and
(iv)
in the absence of
specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the underlying cash flows. The standard is effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The new standard must be adopted using the retrospective transition method. We will adopt the standard on its required
effective date of January 1, 2018. The impact of this standard will not be material to our Consolidated Statements of Cash Flows.
Presentation of restricted cash in the statement of cash flows
In November 2016, the FASB issued an accounting standard that clarifies how entities should present restricted cash and restricted cash
equivalents in the statement of cash flows. The standard requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement
of cash flows. The standard also requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. The standard is effective for fiscal years
beginning after December 15, 2017, including interim periods within those fiscal years. The new standard must be adopted retrospectively. We will adopt the standard on its required effective
date of January 1, 2018. The impact of this standard will not be material to our Consolidated Statements of Cash Flows.
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Comparative results of operations
Results of operations for the year ended December 31, 2017 as compared to the year ended
December 31, 2016
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
(U.S. Dollars
in thousands)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
4,713,802
|
|
|
$
|
4,867,623
|
|
|
Net gain on sale of assets
|
|
229,093
|
|
|
138,522
|
|
|
Other income
|
|
94,598
|
|
|
145,986
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
5,037,493
|
|
|
5,152,131
|
|
|
Expenses
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,727,296
|
|
|
1,791,336
|
|
|
Asset impairment
|
|
61,286
|
|
|
81,607
|
|
|
Interest expense
|
|
1,112,391
|
|
|
1,091,861
|
|
|
Leasing expenses
|
|
537,752
|
|
|
582,530
|
|
|
Restructuring related expenses
|
|
14,605
|
|
|
53,389
|
|
|
Selling, general and administrative expenses
|
|
348,291
|
|
|
351,012
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
3,801,621
|
|
|
3,951,735
|
|
|
|
|
|
|
|
|
Income before income taxes and income of investments accounted for under the equity method
|
|
1,235,872
|
|
|
1,200,396
|
|
|
Provision for income taxes
|
|
(164,718
|
)
|
|
(173,496
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
9,199
|
|
|
12,616
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,080,353
|
|
|
$
|
1,039,516
|
|
|
Net (income) loss attributable to non-controlling interest
|
|
(4,202
|
)
|
|
7,114
|
|
|
|
|
|
|
|
|
Net income attributable to AerCap Holdings N.V
.
|
|
$
|
1,076,151
|
|
|
$
|
1,046,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income.
The principal categories of our revenues and other income and their variances were as follows for the
years ended
December 31, 2017 and 2016:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
Increase/
(Decrease)
|
|
Percentage
Difference
|
|
|
2017
|
|
2016
|
|
|
(U.S. Dollars in millions)
|
Lease revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Basic lease rents
|
|
$
|
4,194.2
|
|
|
$
|
4,395.3
|
|
|
$
|
(201.1
|
)
|
|
(5)%
|
Maintenance rents and other receipts
|
|
519.6
|
|
|
472.3
|
|
|
47.3
|
|
|
10%
|
Net gain on sale of assets
|
|
229.1
|
|
|
138.5
|
|
|
90.6
|
|
|
65%
|
Other income
|
|
94.6
|
|
|
146.0
|
|
|
(51.4
|
)
|
|
(35)%
|
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
$
|
5,037.5
|
|
|
$
|
5,152.1
|
|
|
$
|
(114.6
|
)
|
|
(2)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Basic lease rents.
Basic lease rents decreased by $201.1 million, or 5%, to $4,194.2 million during the year ended
December 31,
2017 from $4,395.3 million during the year ended December 31, 2016. The decrease in basic lease rents recognized during the year ended December 31, 2017 as compared to the year
ended December 31, 2016 was attributable to:
-
-
the sale of 222 aircraft between January 1, 2016 and December 31, 2017 with an aggregate net book value of $3.8 billion on
their sale dates, resulting in a decrease in basic lease rents of $338.6 million; and
-
-
a decrease in basic lease rents of $263.1 million primarily due to re-leases and extensions at lower rates and, to a lesser extent, the
conversion of operating leases to finance leases. The accounting for the extensions requires the remaining rental payments to be recorded on a straight-line basis over the remaining term of the
original lease plus the extension period. This results in a decrease in basic lease rents recognized as revenue during the remaining term of the original lease that will be offset by an increase in
basic lease rents during the extension period. In addition, the contracted lease rates of extensions or re-leases of an aircraft tend to be lower than their previous lease rates as the aircraft are
older, and older aircraft have lower lease rates than newer aircraft,
partially offset by
-
-
the acquisition of 95 aircraft between January 1, 2016 and December 31, 2017, with an aggregate net book value of
$9.1 billion on their acquisition dates, resulting in an increase in basic lease rents of $400.6 million.
Maintenance rents and other receipts.
Maintenance rents and other receipts increased by $47.3 million, or 10%, to
$519.6 million during
the year ended December 31, 2017 from $472.3 million during the year ended December 31, 2016. The increase in maintenance rents and other receipts recognized during the year ended
December 31, 2017 as compared to the year ended December 31, 2016 was attributable to:
-
-
an increase of $31.2 million in regular maintenance rents, primarily due to higher EOL compensation received during the year ended
December 31, 2017 as compared to the year ended December 31, 2016; and
-
-
an increase of $16.1 million in maintenance revenue and other receipts from early lease terminations and restructurings during the year
ended December 31, 2017 as compared to the year ended December 31, 2016.
Net gain on sale of assets.
Net gain on sale of assets increased by $90.6 million, or 65%, to $229.1 million during
the year ended
December 31, 2017 from $138.5 million during the year ended December 31, 2016. During the year ended December 31, 2017, we sold 99 aircraft and reclassified 19 aircraft to
net investment in finance and sales-type leases, whereas during the year ended December 31, 2016, we sold 124 aircraft and reclassified 19 aircraft to net investment in finance and sales-type
leases. Net gain on sale of assets is impacted by the timing and composition of asset sales.
Other income.
Other income decreased by $51.4 million, or 35%, to $94.6 million during the year ended December 31,
2017 from
$146.0 million during the year ended December 31, 2016. During the year ended December 31, 2017, we recognized lower income from lease terminations and during the year ended
December 31, 2016, we recognized non-recurring income from net insurance proceeds and a gain related to the prepayment of a note receivable earlier than expected, partially offset by an expense
related to a lower of cost or market adjustment of AeroTurbine's parts inventory as a result of the AeroTurbine downsizing. Please refer to Note 22
Other
income
to our Consolidated Financial Statements included in this annual report for a detailed description of our other income.
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Depreciation and amortization.
Depreciation and amortization decreased by $64.0 million, or 4%, to $1,727.3 million
during the year
ended December 31, 2017 from $1,791.3 million during the year ended December 31, 2016. The decrease was primarily due to a reduction in the size of our aircraft portfolio due to
aircraft sales.
Asset impairment.
We recognized aggregate impairment charges of $61.3 million during the year ended December 31, 2017
as compared to
$81.6 million during the year ended December 31, 2016. During the year ended December 31, 2017, we recognized impairment charges of $61.3 million on 13 aircraft and two
engines. These impairments were more than offset by lease revenue that we recognized when we retained maintenance-related balances or received EOL compensation. During the year ended
December 31, 2016, we recognized impairment charges of $81.6 million on 35 aircraft. These impairments were more than offset by lease revenue that we recognized when we retained
maintenance-related balances or received EOL compensation. Please refer to Note 24
Asset impairment
to our Consolidated Financial
Statements included in this annual report for a detailed description of our asset impairment.
Interest expense.
Our interest expense increased by $20.5 million, or 2%, to $1,112.4 million during the year ended
December 31,
2017 from $1,091.9 million during the year ended December 31, 2016. The increase in interest expense was primarily attributable to:
-
-
an increase in our average cost of debt to 3.9% for the year ended December 31, 2017 as compared to 3.7% for the year ended
December 31, 2016. Our average cost of debt excludes the effect of mark-to-market movements on our interest rate caps and swaps. The increase in our average cost of debt was primarily due to
the issuance of new longer-term bonds to replace shorter-term ILFC notes, which had lower reported interest expense as a result of the application of the acquisition method of accounting to the debt
assumed as part of the ILFC Transaction. The increase in our average cost of debt resulted in a $53.3 million increase in our interest expense; and
-
-
a $12.6 million increase in non-cash mark-to-market losses on derivatives to $14.2 million recognized during the year ended
December 31, 2017 from $1.6 million recognized during the year ended December 31, 2016,
partially offset by
-
-
a decrease in our average outstanding debt balance by $1.2 billion to $27.9 billion during the year ended December 31,
2017 from $29.1 billion during the year ended December 31, 2016, resulting in a $45.4 million decrease in our interest expense.
Leasing expenses.
Our leasing expenses decreased by $44.8 million, or 8%, to $537.8 million during the year ended
December 31,
2017 from $582.5 million during the year ended December 31, 2016. The decrease was primarily due to $33.8 million of lower maintenance rights intangible asset amortization and
$19.9 million of lower aircraft transition costs, lessor maintenance contributions and other leasing expenses, partially offset by $8.9 million of higher expenses related to early lease
terminations and restructurings, during the year ended December 31, 2017 as compared to the year ended December 31, 2016.
Restructuring related expenses.
Our restructuring related expenses decreased by $38.8 million, or 73%, to
$14.6 million during the year
ended December 31, 2017 from $53.4 million during the year ended December 31, 2016. Our restructuring related expenses were related to the AeroTurbine downsizing. Please refer to
Note 25
AeroTurbine restructuring
to our Consolidated Financial Statements included in this annual report for further details on the
AeroTurbine restructuring.
Selling, general and administrative expenses.
Our selling, general and administrative expenses decreased by $2.7 million, or
1%, to
$348.3 million during the year ended December 31, 2017 from $351.0 million during the year ended December 31, 2016.
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Income before income taxes and income of investments accounted for under the equity method.
For the reasons explained above, our
income before income
taxes and income of investments accounted for under the equity method increased by $35.5 million, or 3%, to $1,235.9 million during the year ended December 31, 2017 from
$1,200.4 million during the year ended December 31, 2016.
Provision for income taxes.
Our provision for income taxes decreased by $8.8 million, or 5%, to $164.7 million during
the year ended
December 31, 2017 from $173.5 million during the year ended December 31, 2016. Our effective tax rate was 13.3% for the year ended December 31, 2017 as compared to 14.5%
for the year ended December 31, 2016. The effective tax rate in 2017 reflects our reassessment of our deferred tax assets and liabilities, including as a result of recent U.S. tax reform
legislation. The higher effective tax rate in 2016 included a valuation allowance related to the AeroTurbine losses. The effective tax rate is impacted by the source and amount of earnings among our
different tax jurisdictions. Please refer to Note 16
Income taxes
to our Consolidated Financial Statements included in this annual
report for a detailed description of our income taxes.
Equity in net earnings of investments accounted for under the equity method.
Our equity in net earnings of investments accounted
for under the equity
method was $9.2 million during the year ended December 31, 2017 as compared to $12.6 million during the year ended December 31, 2016.
Net income.
For the reasons explained above, our net income increased by $40.8 million, or 4%, to $1,080.4 million
during the year
ended December 31, 2017 from $1,039.5 million during the year ended December 31, 2016.
Net (income) loss attributable to non-controlling interest.
Net income attributable to non-controlling interest was
$4.2 million during the
year ended December 31, 2017 as compared to a net loss of $7.1 million during the year ended December 31, 2016.
Net income attributable to AerCap Holdings N.V.
For the reasons explained above, our net income attributable to AerCap
Holdings N.V.
increased by $29.5 million, or 3%, to $1,076.2 million during the year ended December 31, 2017 from $1,046.6 million during the year ended December 31, 2016.
56
Table of Contents
Results of operations for the year ended December 31, 2016 as compared to the year ended
December 31, 2015
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2016
|
|
2015
|
|
|
|
(U.S. Dollars
in thousands)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
4,867,623
|
|
|
$
|
4,991,551
|
|
|
Net gain on sale of assets
|
|
138,522
|
|
|
183,328
|
|
|
Other income
|
|
145,986
|
|
|
112,676
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
5,152,131
|
|
|
5,287,555
|
|
|
Expenses
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,791,336
|
|
|
1,843,003
|
|
|
Asset impairment
|
|
81,607
|
|
|
16,335
|
|
|
Interest expense
|
|
1,091,861
|
|
|
1,099,884
|
|
|
Leasing expenses
|
|
582,530
|
|
|
522,413
|
|
|
Transaction, integration and restructuring related expenses
|
|
53,389
|
|
|
58,913
|
|
|
Selling, general and administrative expenses
|
|
351,012
|
|
|
381,308
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
3,951,735
|
|
|
3,921,856
|
|
|
|
|
|
|
|
|
Income before income taxes and income of investments accounted for under the equity method
|
|
1,200,396
|
|
|
1,365,699
|
|
|
Provision for income taxes
|
|
(173,496
|
)
|
|
(189,805
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
12,616
|
|
|
1,278
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,039,516
|
|
|
$
|
1,177,172
|
|
|
Net loss attributable to non-controlling interest
|
|
7,114
|
|
|
1,558
|
|
|
|
|
|
|
|
|
Net income attributable to AerCap Holdings N.V
.
|
|
$
|
1,046,630
|
|
|
$
|
1,178,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues and other income.
The principal categories of our revenues and other income and their variances were as follows for the
years ended
December 31, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
|
|
Increase/
(Decrease)
|
|
Percentage
Difference
|
|
|
2016
|
|
2015
|
|
|
(U.S. Dollars in millions)
|
Lease revenue:
|
|
|
|
|
|
|
|
|
|
|
|
Basic lease rents
|
|
$
|
4,395.3
|
|
|
$
|
4,635.8
|
|
|
$
|
(240.5
|
)
|
|
(5)%
|
Maintenance rents and other receipts
|
|
472.3
|
|
|
355.8
|
|
|
116.5
|
|
|
33%
|
Net gain on sale of assets
|
|
138.5
|
|
|
183.3
|
|
|
(44.8
|
)
|
|
(24)%
|
Other income
|
|
146.0
|
|
|
112.7
|
|
|
33.3
|
|
|
30%
|
|
|
|
|
|
|
|
|
|
Total revenues and other income
|
|
$
|
5,152.1
|
|
|
$
|
5,287.6
|
|
|
$
|
(135.5
|
)
|
|
(3)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
Table of Contents
Basic lease rents.
Basic lease rents decreased by $240.5 million, or 5%, to $4,395.3 million during the year ended
December 31,
2016 from $4,635.8 million during the year ended December 31, 2015. The decrease in basic lease rents recognized during the year ended December 31, 2016 as compared to the year
ended December 31, 2015 was attributable to:
-
-
the sale of 189 aircraft between January 1, 2015 and December 31, 2016 with an aggregate net book value of $3.3 billion on
their sale dates, resulting in a decrease in basic lease rents of $313.9 million; and
-
-
a decrease in basic lease rents of $221.7 million primarily due to re-leases and extensions at lower rates and, to a lesser extent, the
conversion of operating leases to finance leases. The accounting for the extensions requires the remaining rental payments to be recorded on a straight-line basis over the remaining term of the
original lease plus the extension period. This results in a decrease in basic lease rents recognized as revenue during the remaining term of the original lease that will be offset by an increase in
basic lease rents during the extension period. In addition, the contracted lease rates of extensions or re-leases of an aircraft tend to be lower than their previous lease rates as the aircraft are
older, and older aircraft have lower lease rates than newer aircraft,
-
-
the acquisition of 81 aircraft between January 1, 2015 and December 31, 2016, with an aggregate net book value of
$7.2 billion on their acquisition dates, resulting in an increase in basic lease rents of $295.1 million.
Maintenance rents and other receipts.
Maintenance rents and other receipts increased by $116.5 million, or 33%, to
$472.3 million
during the year ended December 31, 2016 from $355.8 million during the year ended December 31, 2015. The increase in maintenance rents and other receipts recognized during the
year ended December 31, 2016 as compared to the year ended December 31, 2015 was attributable to:
-
-
an increase of $52.0 million in maintenance revenue and other receipts from early lease terminations and restructurings during the year
ended December 31, 2016 as compared to the year ended December 31, 2015; and
-
-
an increase of $64.5 million in regular maintenance rents during the year ended December 31, 2016 as compared to the year ended
December 31, 2015.
Net gain on sale of assets.
Net gain on sale of assets decreased by $44.8 million, or 24%, to $138.5 million during
the year ended
December 31, 2016 from $183.3 million during the year ended December 31, 2015. During the year ended December 31, 2016, we sold 124 aircraft and reclassified
19 aircraft to net investment in finance and sales-type leases, whereas during the year ended December 31, 2015, we sold 59 aircraft and reclassified 11 aircraft to net investment in
finance and sales-type leases. Net gain on sale of assets is impacted by the timing and composition of asset sales.
Other income.
Other income increased by $33.3 million, or 30%, to $146.0 million during the year ended
December 31, 2016 from
$112.7 million during the year ended December 31, 2015. The increase was primarily due to higher income during the year ended December 31, 2016 from lease terminations, net
insurance proceeds, and a gain related to the prepayment of a note receivable earlier than expected, partially offset by lower gross profit on engine, airframe, parts and supplies sales as a result of
the AeroTurbine downsizing. During the year ended December 31, 2015, we also recognized a gain from the settlement of asset value guarantees. Please refer to
Note 22
Other income
to our Consolidated Financial Statements included in this annual report for a detailed description of our other
income.
Depreciation and amortization.
Depreciation and amortization decreased by $51.7 million, or 3%, to $1,791.3 million
during the year
ended December 31, 2016 from $1,843.0 million during the year ended December 31, 2015. The decrease was primarily due to a reduction in the size of our aircraft portfolio due to
aircraft sales.
58
Table of Contents
Asset impairment.
We recognized aggregate impairment charges of $81.6 million during the year ended December 31, 2016
as compared to
$16.3 million during the year ended December 31, 2015. During the year ended December 31, 2016, we recognized impairment charges of $81.6 million on 35 aircraft. These
impairments were more than offset by lease revenue that we recognized when we retained maintenance-related balances or received EOL compensation. During the year ended December 31, 2015, we
recognized impairment charges of $16.3 million, primarily related to eight aircraft and 12 engines. These impairments were more than offset by lease revenue that we recognized when we retained
maintenance-related balances or received EOL compensation. Please refer to Note 24
Asset impairment
to our Consolidated Financial
Statements included in this annual report for a detailed description of our asset impairment.
Interest expense.
Our interest expense decreased by $8.0 million, or 1%, to $1,091.9 million during the year ended
December 31,
2016 from $1,099.9 million during the year ended December 31, 2015. The decrease in interest expense was primarily attributable to:
-
-
a decrease in our average outstanding debt balance by $0.7 billion to $29.1 billion during the year ended December 31,
2016 from $29.8 billion during the year ended December 31, 2015, primarily due to regular debt repayments, resulting in a $23.1 million decrease in our interest expense; and
-
-
a $16.5 million decrease in non-cash mark-to-market losses on derivatives to $1.6 million recognized during the year ended
December 31, 2016 from $18.1 million recognized during the year ended December 31, 2015,
-
-
an increase in our average cost of debt to 3.7% for the year ended December 31, 2016 as compared to 3.6% for the year ended
December 31, 2015. Our average cost of debt excludes the effect of mark-to-market movements on our interest rate caps and swaps, and in 2015, includes a one-time charge of $16.9 million
related to prior periods to correct capitalized interest. The increase in our average cost of debt was primarily due to the issuance of new longer-term bonds to replace shorter-term ILFC notes, which
had lower reported interest expense as a result of the application of the acquisition method of accounting to the debt assumed as part of the ILFC Transaction. The increase in our average cost of debt
resulted in a $31.6 million increase in our interest expense.
Leasing expenses.
Our leasing expenses increased by $60.1 million, or 12%, to $582.5 million during the year ended
December 31,
2016 from $522.4 million during the year ended December 31, 2015. The increase was primarily due to $33.2 million higher maintenance rights intangible asset amortization expense
and $38.3 million higher aircraft transition costs, lessor maintenance contributions and other leasing expenses, partially offset by $11.4 million lower expenses related to early lease
terminations and restructurings recognized during the year ended December 31, 2016 as compared to the year ended December 31, 2015.
Transaction, integration and restructuring related expenses.
Our transaction, integration and restructuring related expenses
decreased by
$5.5 million, or 9%, to $53.4 million during the year ended December 31, 2016 from $58.9 million during the year ended December 31, 2015. During the year ended
December 31, 2016, our transaction, integration and restructuring related expenses were related to the AeroTurbine downsizing. During the year ended December 31, 2015, our transaction,
integration and restructuring related expenses consisted of $49.3 million related to the AeroTurbine downsizing and $9.6 million of severance and other compensation expenses and rent
termination costs due to the ILFC Transaction. Please refer to Note 25
AeroTurbine restructuring
to our Consolidated Financial
Statements included in this annual report for further details on the AeroTurbine restructuring.
59
Table of Contents
Selling, general and administrative expenses.
Our selling, general and administrative expenses decreased by $30.4 million,
or 8%, to
$351.0 million during the year ended December 31, 2016 from $381.4 million during the year ended December 31, 2015. The decrease was due to lower overhead expenses as a
result of the AeroTurbine downsizing as well as other expense reductions.
Income before income taxes and income of investments accounted for under the equity method.
For the reasons explained above, our
income before income
taxes and income of investments accounted for under the equity method decreased by $165.3 million, or 12%, to $1,200.4 million during the year ended December 31, 2016 from
$1,365.7 million during the year ended December 31, 2015.
Provision for income taxes.
Our provision for income taxes decreased by $16.3 million, or 9%, to $173.5 million during
the year ended
December 31, 2016 from $189.8 million during the year ended December 31, 2015. Our effective tax rate was 14.5% for the year ended December 31, 2016 as compared to 13.9%
for the year ended December 31, 2015. The increase in our effective tax rate for the year ended December 31, 2016 was primarily due to changes in our valuation allowance in the United
States during the years ended December 31, 2015 and 2016. The effective tax rate is impacted by the source and amount of earnings among our different tax jurisdictions. Please refer to
Note 16
Income taxes
to our Consolidated Financial Statements included in this annual report for a detailed description of our income
taxes.
Equity in net earnings of investments accounted for under the equity method.
Our equity in net earnings of investments accounted
for under the equity
method was $12.6 million during the year ended December 31, 2016 as compared to $1.3 million during the year ended December 31, 2015. During the year ended
December 31, 2015, our equity in net earnings of investments accounting for under the equity method was impacted by a loss of approximately $4 million from one of our investments.
Net income.
For the reasons explained above, our net income decreased by $137.7 million, or 12%, to $1,039.5 million
during the year
ended December 31, 2016 from $1,177.2 million during the year ended December 31, 2015.
Net loss attributable to non-controlling interest.
Net loss attributable to non-controlling interest was $7.1 million
during the year ended
December 31, 2016 as compared to $1.5 million during the year ended December 31, 2015.
Net income attributable to AerCap Holdings N.V.
For the reasons explained above, our net income
attributable to AerCap Holdings N.V. decreased by $132.1 million, or 11%, to $1,046.6 million during the year ended December 31, 2016 from $1,178.7 million during
the year ended December 31, 2015.
60
Table of Contents
Liquidity and capital resources
The following table presents our consolidated cash flows for the years ended December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
(U.S. Dollars
in millions)
|
|
Net cash provided by operating activities
|
|
$
|
3,140.2
|
|
|
$
|
3,381.2
|
|
|
Net cash used in investing activities
|
|
(3,427.4
|
)
|
|
(1,331.1
|
)
|
|
Net cash used in financing activities
|
|
(87.6
|
)
|
|
(2,417.2
|
)
|
|
Cash flows provided by operating activities.
During the year ended December 31, 2017, our cash provided by operating
activities of
$3,140.2 million was the result of net income of $1,080.4 million, non-cash and other adjustments to net income of $1,995.1 million and the net change in operating assets and
liabilities of $64.7 million. During the year ended December 31, 2016, our cash provided by operating activities of $3,381.2 million was the result of net income of
$1,039.5 million, non-cash and other adjustments to net income of $2,076.6 million and the net change in operating assets and liabilities of $265.1 million.
Cash flows used in investing activities.
During the year ended December 31, 2017, our cash used in investing activities of
$3,427.4 million primarily consisted of cash used for the purchase of aircraft of $5,263.3 million and an increase in our restricted cash of $35.3 million, partially offset by
cash provided by asset sale proceeds of $1,779.3 million and collections of finance and sales-type leases of $91.9 million. During the year ended December 31, 2016, our cash used
in investing activities of $1,331.1 million primarily consisted of cash used for the purchase of aircraft and other fixed assets of $3,861.8 million, partially offset by cash provided by
asset sale proceeds of $2,366.2 million, a decrease in our restricted cash of $90.3 million and collections of finance and sales-type leases of $74.2 million.
Cash flows used in financing activities.
During the year ended December 31, 2017, our cash used in financing activities of
$87.6 million primarily consisted of cash used for the repurchase of shares and payments of tax withholdings on share-based compensation of $1,138.8 million and cash used for the payment
of dividends to our non-controlling interest holders of $0.3 million. This was partially offset by cash provided by new financing proceeds, net of debt repayments and debt issuance costs of
$819.6 million and net receipts of maintenance and security deposits of $231.9 million. During the year ended December 31, 2016, our cash used in financing activities of
$2,417.2 million primarily consisted of cash used for debt repayments and debt issuance costs, net of new financing proceeds of $1,606.3 million, cash used for the repurchase of shares
and payments of tax withholdings on share-based compensation of $1,021.1 million and cash used for the payment of dividends to our non-controlling interest holders of $10.5 million,
partially offset by cash provided by net receipts of maintenance and security deposits of $220.7 million.
Aircraft
leasing is a capital-intensive business and we have significant capital requirements, including making pre-delivery payments and paying the balance of the purchase price for
aircraft on delivery. As of December 31, 2017, we had 438 new aircraft on order, including 222 Airbus A320neo Family aircraft, 104 Boeing 737MAX aircraft, 53 Boeing 787
aircraft, 50 Embraer E-Jets E2 aircraft, and nine Airbus A350 aircraft. As a result, we will need to raise additional funds to satisfy these requirements, which we expect to do through a combination
of accessing committed debt facilities and securing additional financing, if needed, from capital market transactions or other sources of capital. If other sources of capital are not available to us,
we may need to raise additional funds through selling aircraft or other aircraft investments, including participations in our joint ventures.
61
Table of Contents
Our
existing sources of liquidity of $12.8 billion as of December 31, 2017, were sufficient to operate our business and cover at least 1.2x of our debt maturities and
contracted capital requirements for the next 12 months. Our sources of liquidity for the next 12 months include undrawn lines of credit, unrestricted cash, estimated operating cash
flows, cash flows from contracted asset sales and other sources of funding.
Our
cash balance as of December 31, 2017 was $2.0 billion, including unrestricted cash of $1.7 billion. As of December 31, 2017, we had approximately
$6.7 billion of undrawn lines of credit available under our credit and term loan facilities. Our total available liquidity, including undrawn lines of credit, unrestricted cash, cash flows from
contracted asset sales and other sources of funding, was $9.6 billion as of December 31, 2017. Including estimated operating cash flows for the next 12 months, our total sources
of liquidity were $12.8 billion as of December 31, 2017. As of December 31, 2017, the principal amount of our outstanding indebtedness, which excludes fair value adjustments of
$0.3 billion and debt issuance costs and debt discounts of $0.2 billion, totaled $28.3 billion and primarily consisted of senior unsecured, subordinated and senior secured notes,
export credit facilities, commercial bank debt, revolving credit debt, securitization debt and capital lease structures.
In
order to satisfy our contractual purchase obligations, we expect to source new debt finance for our capital expenditures through access to capital markets, including the unsecured and
secured bond markets, the commercial bank market, export credit and the asset-backed securities market.
In
the longer term, we expect to fund the growth of our business, including acquiring aircraft, through internally generated cash flows, the incurrence of new bank debt, the refinancing
of existing bank debt and other capital raising initiatives.
Our
debt, including fair value adjustments of $0.3 billion and net of debt issuance costs and debt discounts of $0.2 billion, was $28.4 billion as of
December 31, 2017, and our average cost of debt, excluding the effect of mark-to-market movements on our interest rate caps and swaps, was 3.9% during the year ended December 31, 2017.
Our adjusted debt to equity ratio was 2.8 to 1 as of December 31, 2017. Please refer to "Item 5. Operating and Financial Review and ProspectsNon-GAAP measures" for
reconciliations of adjusted debt and adjusted equity to the most closely related U.S. GAAP measures as of December 31, 2017 and 2016.
Please
refer to Note 15
Debt
to our Consolidated Financial Statements included in this annual report for a detailed
description of our outstanding indebtedness.
AerCap
Holdings N.V. is incorporated in the Netherlands and headquartered in Ireland, and is not directly engaged in business within, nor has a permanent establishment in, the
United States. Only our U.S. subsidiaries are subject to U.S. net income tax or would potentially have to withhold U.S. taxes upon a distribution of our earnings.
While
we were tax resident in the Netherlands, we did not accrue or pay taxes as a result of repatriation of earnings from any of our foreign subsidiaries to the Netherlands. Effective
February 1, 2016, we became tax resident in Ireland and we would typically expect that the repatriation of earnings from our foreign subsidiaries should not, except where recognized in our
financial statements, give rise to material additional Irish taxation due to the availability of foreign tax credits. As of December 31,
2017, $151.7 million out of $1,659.7 million of cash and short-term investments was held by our foreign subsidiaries outside of Ireland. Additionally, legal restrictions in relation to
dividend payments from our subsidiaries to us are described in "Item 10. Additional InformationTaxationWithholding tax" and "Item 3. Key
InformationRisk FactorsRisks related to our organization and structureIf our subsidiaries do not make distributions to us we will not be able to pay dividends."
62
Table of Contents
Contractual obligations
Our contractual obligations consist of principal and interest payments on debt (excluding fair value adjustments, debt issuance costs and debt
discounts), executed purchase agreements to purchase aircraft and rent payments pursuant to our office and facility leases. We intend to fund our contractual obligations through unrestricted cash,
lines-of-credit and other borrowings, operating cash flows and cash flows from asset sales. We believe that our sources of liquidity will be sufficient to meet our contractual obligations.
The
following table provides details regarding our contractual obligations and their payment dates as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Unsecured debt facilities
|
|
$
|
770.0
|
|
|
$
|
3,199.9
|
|
|
$
|
2,850.0
|
|
|
$
|
2,800.0
|
|
|
$
|
3,500.0
|
|
|
$
|
1,800.0
|
|
|
$
|
14,919.9
|
|
|
Secured debt facilities
|
|
2,407.4
|
|
|
992.1
|
|
|
1,351.7
|
|
|
871.9
|
|
|
2,807.5
|
|
|
3,356.9
|
|
|
11,787.5
|
|
|
Subordinated debt facilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.4
|
|
|
1,547.4
|
|
|
1,555.8
|
|
|
Estimated interest payments (a)
|
|
1,248.0
|
|
|
1,024.6
|
|
|
900.2
|
|
|
656.4
|
|
|
480.6
|
|
|
3,052.4
|
|
|
7,362.2
|
|
|
Purchase obligations (b)
|
|
6,065.1
|
|
|
5,723.1
|
|
|
4,742.2
|
|
|
3,714.5
|
|
|
2,405.7
|
|
|
1,662.3
|
|
|
24,312.9
|
|
|
Operating leases (c)
|
|
10.2
|
|
|
7.7
|
|
|
7.6
|
|
|
7.7
|
|
|
7.8
|
|
|
44.4
|
|
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,500.7
|
|
|
$
|
10,947.4
|
|
|
$
|
9,851.7
|
|
|
$
|
8,050.5
|
|
|
$
|
9,210.0
|
|
|
$
|
11,463.4
|
|
|
$
|
60,023.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Estimated
interest payments for floating rate debt are based on rates as of December 31, 2017. Estimated interest payments include the estimated impact of our
interest rate swap agreements.
-
(b)
-
Includes
commitments to purchase 426 aircraft and 12 purchase and leaseback transactions. See Note 29
Commitments and
contingencies
to our Consolidated Financial Statements included in this annual report for further details on our purchase obligations.
-
(c)
-
Represents
contractual payments on our office and facility leases.
Off-balance sheet arrangements
We have interests in variable interest entities, some of which are not consolidated into our Consolidated Financial Statements. Please refer to
Note 27
Variable interest entities
to our Consolidated Financial Statements included in this annual report for a detailed description
of these interests and our other off-balance sheet arrangements.
63
Table of Contents
Book value per share
The following table presents our book value per share as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
(U.S. Dollars in millions, except
share and per share data)
|
|
Total AerCap Holdings N.V. shareholders' equity
|
|
$
|
8,579.7
|
|
|
$
|
8,524.4
|
|
|
Ordinary shares issued
|
|
167,847,345
|
|
|
187,847,345
|
|
|
Treasury shares
|
|
(14,855,244
|
)
|
|
(11,600,191
|
)
|
|
|
|
|
|
|
|
Ordinary shares outstanding
|
|
152,992,101
|
|
|
176,247,154
|
|
|
Shares of unvested restricted stock
|
|
(3,007,752
|
)
|
|
(3,426,810
|
)
|
|
|
|
|
|
|
|
Ordinary shares outstanding, excluding shares of unvested restricted stock
|
|
149,984,349
|
|
|
172,820,344
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value per ordinary share outstanding, excluding shares of unvested restricted stock
|
|
$
|
57.20
|
|
|
$
|
49.33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book
value per share increased 16% between December 31, 2016 and December 31, 2017.
Non-GAAP measures
The following are definitions of non-GAAP measures used in this report on Form 20-F and a reconciliation of such measures to the most
closely related U.S. GAAP measures.
Net interest margin, or net spread, and annualized net spread
Net interest margin, or net spread, is calculated as the difference between basic lease rents and interest expense, excluding the impact of the
mark-to-market of interest rate caps and swaps. Annualized net spread is net interest margin expressed as a percentage of average lease assets. We believe these measures may further assist investors
in their understanding of the changes and trends related to the earnings of our leasing activities. These measures reflect the impact from changes in the number of aircraft leased, lease rates and
utilization rates, as well as the impact from changes in the amount of debt and interest rates.
The
following is a reconciliation of basic lease rents to net spread and annualized net spread for the years ended December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
Percentage
Difference
|
|
|
2017
|
|
2016
|
|
|
(U.S. Dollars in millions)
|
|
|
Basic lease rents
|
|
$
|
4,194.2
|
|
|
$
|
4,395.3
|
|
|
(5)%
|
Interest expense
|
|
1,112.4
|
|
|
1,091.9
|
|
|
2%
|
Adjusted for:
|
|
|
|
|
|
|
|
|
Mark-to-market of interest rate caps and swaps
|
|
(14.2
|
)
|
|
(1.6
|
)
|
|
788%
|
|
|
|
|
|
|
|
Adjusted interest expense
|
|
1,098.2
|
|
|
1,090.3
|
|
|
1%
|
|
|
|
|
|
|
|
Net interest margin, or net spread
|
|
$
|
3,096.0
|
|
|
$
|
3,305.0
|
|
|
(6)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average lease assets
|
|
$
|
34,228
|
|
|
$
|
34,857
|
|
|
(2)%
|
|
|
|
|
|
|
|
Annualized net spread
|
|
9.0%
|
|
|
9.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64
Table of Contents
Adjusted debt to equity ratio
This measure is the ratio obtained by dividing adjusted debt by adjusted equity. Adjusted debt represents consolidated total debt less cash and
cash equivalents, and less a 50% equity credit with respect to certain long-term subordinated debt. Adjusted equity represents total equity, plus the 50% equity credit with respect to the long-term
subordinated debt. Adjusted debt and adjusted equity are adjusted by the 50% equity credit to reflect the equity nature of those financing arrangements and to provide information that is consistent
with definitions under certain of our debt covenants. We believe this measure may further assist investors in their understanding of our capital structure and leverage.
The
following is a reconciliation of debt to adjusted debt and equity to adjusted equity as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
(U.S. Dollars in millions
except debt/equity ratio)
|
|
Debt
|
|
$
|
28,420.7
|
|
|
$
|
27,717.0
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
(1,659.7
|
)
|
|
(2,035.4
|
)
|
|
50% credit for long-term subordinated debt
|
|
(750.0
|
)
|
|
(750.0
|
)
|
|
|
|
|
|
|
|
Adjusted debt
|
|
$
|
26,011.0
|
|
|
$
|
24,931.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
$
|
8,638.8
|
|
|
$
|
8,582.3
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
50% credit for long-term subordinated debt
|
|
750.0
|
|
|
750.0
|
|
|
|
|
|
|
|
|
Adjusted equity
|
|
$
|
9,388.8
|
|
|
$
|
9,332.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted debt/equity ratio
|
|
2.8 to 1
|
|
|
2.7 to 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
65
Table of Contents
Item 6. Directors, Senior Management and Employees
Directors and officers
|
|
|
|
|
|
|
|
|
Name
|
|
Age
|
|
Position
|
|
Date of First
Appointment
|
|
End Current
Term (a)
|
Directors
|
|
|
|
|
|
|
|
|
Pieter Korteweg
|
|
76
|
|
Non-Executive Chairman of the Board of Directors
|
|
September 2006
|
|
2018 AGM
|
Aengus Kelly
|
|
44
|
|
Executive Director and Chief Executive Officer
|
|
May 2011
|
|
2019 AGM
|
Salem Al Noaimi
|
|
42
|
|
Non-Executive Director
|
|
May 2011
|
|
2018 AGM
|
Homaid Al Shimmari
|
|
50
|
|
Non-Executive Director
|
|
May 2011
|
|
2018 AGM
|
James (Jim) Chapman
|
|
55
|
|
Non-Executive Director
|
|
July 2006
|
|
2018 AGM
|
Paul Dacier
|
|
60
|
|
Non-Executive Director and Vice Chairman
|
|
May 2010
|
|
2018 AGM
|
Richard (Michael) Gradon
|
|
58
|
|
Non-Executive Director
|
|
May 2010
|
|
2018 AGM
|
Marius Jonkhart
|
|
67
|
|
Non-Executive Director
|
|
July 2006
|
|
2018 AGM
|
James (Jim) Lawrence
|
|
65
|
|
Non-Executive Director
|
|
May 2017
|
|
2021 AGM
|
Michael Walsh
|
|
51
|
|
Non-Executive Director
|
|
May 2017
|
|
2021 AGM
|
Robert (Bob) Warden
|
|
45
|
|
Non-Executive Director
|
|
July 2006
|
|
2018 AGM
|
Officers
|
|
|
|
|
|
|
|
|
Wouter (Erwin) den Dikken
|
|
50
|
|
Chief Operating Officer and Chief Legal Officer
|
|
|
|
|
Peter Juhas
|
|
46
|
|
Chief Financial Officer
|
|
|
|
|
Philip G. Scruggs
|
|
53
|
|
Chief Commercial Officer and President
|
|
|
|
|
Peter Anderson
|
|
42
|
|
Head of Asia Pacific
|
|
|
|
|
Brian Canniffe
|
|
45
|
|
Group Treasurer
|
|
|
|
|
Tom Kelly
|
|
54
|
|
Chief Executive Officer, AerCap Ireland Limited
|
|
|
|
|
Theresa Murray
|
|
50
|
|
Head of Human Resources
|
|
|
|
|
Edward (Ted) O'Byrne
|
|
46
|
|
Chief Investment Officer
|
|
|
|
|
Martin Olson
|
|
55
|
|
Head of OEM Relations
|
|
|
|
|
Sean Sullivan
|
|
49
|
|
Head of Americas
|
|
|
|
|
Joe Venuto
|
|
58
|
|
Chief Technical Officer
|
|
|
|
|
Kenneth Wigmore
|
|
49
|
|
Head of EMEA
|
|
|
|
|
-
(a)
-
The
term for each director ends at the Annual General Meeting of Shareholders ("AGM") typically held in April or May of each year.
66
Table of Contents
Directors
Pieter Korteweg.
Mr. Korteweg has been a Director of AerCap since September 27, 2006. He serves as Vice Chairman of
Cerberus Global
Investment Advisors, LLC (New York). In addition, he serves as Chairman of Cerberus Global Investments B.V. (Baarn) and Chairman of the Supervisory Boards of Bawag Holding AG and Bawag
PSK Bank AG (Vienna). Mr. Korteweg previously served, amongst others, as Non-Executive Member of the Board of Haya Real Estate S.L.U. (Madrid), Chairman of the Board of Capital Home
Loans Ltd., Member of the Supervisory Board of Mercedes Benz Nederland B.V., Non-Executive Member of the Board of Aozora Bank Ltd. (Tokyo), Chairman of the Supervisory Board of
Pensions and Insurance Supervisory Authority of the Netherlands, Chairman of the Supervisory Board of the Dutch Central Bureau of Statistics and Vice Chairman of the Supervisory Board of De
Nederlandsche Bank. From 1987 to 2001, Mr. Korteweg was President and Chief Executive Officer of Robeco Group in Rotterdam. From 1981 to 1986, he was Treasurer General of the Dutch Ministry of
Finance. Mr. Korteweg was a professor of economics from 1971 to 1998 at Erasmus University Rotterdam in the Netherlands. He holds a Ph.D. in Economics from Erasmus University Rotterdam.
Aengus Kelly.
Mr. Kelly was appointed Executive Director and Chief Executive Officer of AerCap on May 18, 2011.
Previously he served as
Chief Executive Officer of AerCap's U.S. operations from January 2008 to May 2011. Mr. Kelly served as AerCap's Group Treasurer from 2005 through December 31, 2007. He started his career
in the aviation leasing and financing business with GPA in 1998 and continued working with its successors AerFi in Ireland and debis AirFinance and AerCap in Amsterdam. Prior to
joining GPA in 1998, he spent three years with KPMG in Dublin. Mr. Kelly is a Chartered Accountant and holds a Bachelor's degree in Commerce and a Master's degree in Accounting from
University College, Dublin.
Salem Al Noaimi.
Mr. Al Noaimi has been a Director of AerCap since May 18, 2011. Mr. Al Noaimi is also Waha
Capital's Chief
Executive Officer and Managing Director, responsible for leading the company's overall strategy across its business lines. Mr. Al Noaimi has served as Waha's CEO over the past eight years, with
previous roles including Deputy CEO of Waha, and CEO of Waha Leasing. Earlier in his career, Mr. Al Noaimi held various positions at Dubai Islamic Bank, the UAE Central Bank, the Abu Dhabi Fund
for Development and Kraft Foods. He chairs and sits on the Board of a number of companies, including Abu Dhabi Ship Building, Dunia Finance, Anglo Arabian Healthcare, Al Dhafra Insurance Company and
Bahrain's ADDAX Bank. Mr. Al Noaimi is an UAE national with a degree in Finance and International Business from Northeastern University in Boston.
Homaid Al Shimmari.
Mr. Al Shimmari has been a Director of AerCap since May 18, 2011. Mr. Al Shimmari is also
Chief Executive
Officer of Mubadala Aerospace & Engineering Services and member of the Investment Committee at Mubadala. He holds prominent roles with key aerospace, communications technology, defense and
energy companies and organizations, including Chairman of Emirates Defence Industries Company (EDIC), Maximus Air Cargo, Abu Dhabi Autonomous Systems Investment (ADASI) and Abu Dhabi Ship Building,
and currently holds board positions with Mubadala Petroleum, Masdar, Global Foundries, Abu Dhabi Aviation, Royal Jet, du - Emirates Integrated Telecommunications Company PJSC and SR Technics
Holdco 1 GmbH. Mr. Al Shimmari is also a Board Member of the UAE University Board of Trustees and Chairman of the Advisory Board of Etihad Airways Engineering LLC. Before joining
Mubadala, Mr. Al Shimmari was a Lieutenant Colonel in the UAE Armed Forces serving in the areas of military aviation, maintenance, procurement and logistics. Mr. Al Shimmari holds a
Bachelor of Science in Aeronautical Engineering from Embry Riddle Aeronautical University in Daytona Beach, Florida, and holds a black belt in Six Sigma from General Electric, a highly disciplined
leadership program.
67
Table of Contents
James (Jim) Chapman.
Mr. Chapman has been a Director of AerCap since July 26, 2006. Mr. Chapman serves as a
Non-Executive
Advisory Director of SkyWorks Capital, LLC, an aviation and aerospace management consulting services company based in Greenwich, Connecticut, which he joined in December 2004. Prior to
SkyWorks, Mr. Chapman joined Regiment Capital Advisors, an investment advisor based in Boston specializing in high yield investments, which he joined in January 2003. Prior to Regiment,
Mr. Chapman was a capital markets and strategic planning consultant and worked with private and public companies as well as hedge funds (including Regiment) across a range of industries.
Mr. Chapman was affiliated with The Renco Group, Inc. from December 1996 to December 2001. Prior to Renco, Mr. Chapman worked in the financial services industry at Fieldstone
Private Capital Group from 1990 through 1996 and Bankers Trust Company from 1985 through 1990. Presently, Mr. Chapman serves as a member of the Board of Directors of Arch Coal, Inc. and
Tower International, Inc. Mr. Chapman received an MBA with distinction from Dartmouth College and was elected as an Edward Tuck Scholar. He received his B.A., with distinction, magna cum
laude, from Dartmouth College and was elected to Phi Beta Kappa, in addition to being a Rufus Choate Scholar.
Paul Dacier.
Mr. Dacier has been a Director of AerCap since May 27, 2010. He is also currently the general counsel at
Indigo
Agriculture, a privately held start-up company. Presently, Mr. Dacier serves as a Non-Executive Director of GTY Technology Holdings Inc. (a technology holding company), and he is on the
Board of Directors of Progress Software Inc. (a software application development company). Until 2016, Mr. Dacier was Executive Vice President and General Counsel of EMC Corporation (an
information infrastructure technology and solutions company), where he worked in various positions from 1990. He was a Non-Executive Director of Genesis from November 2007 until the date of the
amalgamation with AerCap International Bermuda Limited. Prior to joining EMC, Mr. Dacier was an attorney with Apollo Computer Inc. (a computer work station company) from 1984 to 1990.
Mr. Dacier received a B.A. in history and a J.D. in 1983 from Marquette University. He is admitted to practice law in the Commonwealth of Massachusetts and the state of Wisconsin.
Richard (Michael) Gradon.
Mr. Gradon has been a Director of AerCap since May 27, 2010. He is also currently a
Non-Executive Director of
Exclusive Hotels, and is on the Board of Directors of The All England Lawn Tennis Ground PLC, The All England Lawn Tennis Club and The Wimbledon Championships. He was a Non-Executive Director
of Genesis from November 2007 until the date of the amalgamation with AerCap International Bermuda Limited. He practiced law at Slaughter & May before joining the UK FTSE 100 company The
Peninsular & Oriental Steam Navigation Company (P&O) where he was a main Board Director from 1998 until its takeover in 2006. His roles at P&O included the group commercial & legal
director function and he served as Chairman of P&O's property division. In addition, Mr. Gradon served as Chairman of La Manga Club, Spain, and Chief Executive Officer of the London Gateway
projects. Mr. Gradon holds an M.A. degree in law from Cambridge University.
Marius Jonkhart.
Mr. Jonkhart has been a Director of AerCap since July 26, 2006. He is also currently a member of the
Supervisory
Boards of Ecorys Holding and Tata Steel Nederland. He was previously Chief Executive Officer of De Nationale Investeringsbank (NIBC) and the Chief Executive Officer of NOB Holding. He also served as
the Director of Monetary Affairs of the Dutch Ministry of Finance. In addition, he has been a professor of finance at Erasmus University Rotterdam. He has served as a member of a number of Supervisory
Boards, including the Supervisory Boards of BAWAG PSK Bank, Staatsbosbeheer, Connexxion Holding, European Investment Bank, Bank Nederlandse Gemeenten, Postbank, NPM Capital, Kema, AM Holding and De
Nederlandsche Bank. He has also served as a Non-Executive Director of Aozora Bank, and Chairman of the Investment Board of ABP Pension Fund and several other funds. Mr. Jonkhart holds a
Master's degree in Business Administration, a Master's degree in Business Economics and a Ph.D. in Economics from Erasmus University Rotterdam.
68
Table of Contents
James (Jim) Lawrence.
Mr. Lawrence has been a Director of AerCap since May 5, 2017. He is currently Chairman of Great
North
Star LLC, a private investment firm. Previously, Mr. Lawrence served as Chairman of Rothschild North America and earlier as Chief Executive Officer of Rothschild North America and as
co-head of global investment banking at Rothschild from 2010 to 2015. Prior to Rothschild, Mr. Lawrence was Chief Financial Officer of Unilever and he served as Executive Director on the boards
of Unilever NV and Unilever PLC. He joined Unilever in 2007 after serving as the Vice Chairman and Chief Financial Officer of General Mills for nine years. Prior to General Mills,
Mr. Lawrence was Executive Vice President and Chief Financial Officer of Northwest Airlines from 1996 to 1998, and before that Mr. Lawrence was a division President at PepsiCo, serving
as CEO of Pepsi-Cola Asia, Middle East, Africa from 1992 to 1996. In 1983, he cofounded The LEK Partnership, a corporate strategy and merger/acquisition firm, headquartered in London. Before that he
was a Partner of Bain and Company, having opened their London and Munich offices. Prior to that, he worked for The Boston Consulting Group. Mr. Lawrence is currently a Non-Executive Director of
Avnet Inc., Smurfit Kappa Group and, until 2018, IAG (International Consolidated Airlines Group). His aviation industry experience dates from 1990, and it includes, in addition to being the
Chief Financial Officer of Northwest Airlines, serving on the boards of Continental Airlines, TWA, Mesaba and British Airways. Since 1990, Mr. Lawrence has served on 16 public company boards,
several private company boards and numerous non-profit boards. Mr. Lawrence earned a Bachelor of Arts in Economics from Yale University and an M.B.A. with distinction from Harvard Business
School.
Michael Walsh.
Mr. Walsh has been a Director of AerCap since May 5, 2017. He is also currently a Non-Executive
Director of NS Financial
Services (Holdings) Limited, an international train leasing and financing company, which is a wholly owned subsidiary of NS Groep, the state railway company of the Netherlands. He previously served as
a Non-Executive Director, including Chairman, of a number of companies that finance and lease aircraft and trains throughout the world. Mr. Walsh has over 25 years' experience as a
Non-Executive Director, senior executive and commercial lawyer in the aircraft leasing and financing industry. In 1989, he joined GPA Group plc, the aircraft leasing and financing
company, and held a number of senior management positions, including General Counsel. Following the acquisition of GPA by debis AirFinance in 2000, Mr. Walsh was appointed General
Counsel of debis AirFinance and held that position until 2002. From 2003 to 2005, he served as Chief Legal Officer of Bord Gais Eireann, the Irish gas utility. From 1986 to 1989, he was a diplomat in
the Irish Diplomatic Service. Mr. Walsh is a barrister and a law graduate of University College, Cork, Ireland.
Robert (Bob)Warden.
Mr. Warden has been a Director of AerCap since July 26, 2006. He is also currently a Partner at
Pamplona Capital
Management, a private equity investment firm, which he joined in August 2012. Mr. Warden serves as a director for several private companies affiliated with Pamplona. Prior to joining Pamplona,
Mr. Warden was Managing Director at Cerberus Capital Management, L.P. from February 2003 to August 2012, a Vice President at J.H. Whitney from May 2000 to February 2003, a Principal at
Cornerstone Equity Investors LLC from July 1998 to May 2000 and an Associate at Donaldson, Lufkin & Jenrette from July 1995 to July 1998. Mr. Warden received his A.B. from Brown
University.
Officers
Wouter (Erwin) den Dikken.
Mr. den Dikken was appointed Chief Operating Officer of AerCap in 2010, in addition to his role
as Chief Legal
Officer to which he was appointed in 2005. Mr. den Dikken also previously served as Chief Executive Officer of AerCap's Irish operations. He joined the AerCap legal department in 1998. Prior to
joining AerCap, Mr. den Dikken worked for an international packaging company in Germany as Senior Legal Counsel where he focused on mergers and acquisitions. Mr. den Dikken holds a law
degree from Utrecht University. On February 2, 2018, we announced through a press release that Vincent Drouillard will become our General Counsel in June 2018. Mr. den Dikken will remain
with AerCap through May 2018.
69
Table of Contents
Peter Juhas.
Mr. Juhas was appointed Chief Financial Officer of AerCap in April 2017, following his appointment as Deputy
Chief Financial
Officer in September 2015. Prior to joining AerCap, Mr. Juhas was Global Head of Strategic Planning at AIG, where he led the development of the company's strategic and capital plans, as well as
mergers, acquisitions and other transactions, including the sale of ILFC to AerCap. Prior to joining AIG in 2011, Mr. Juhas was Managing Director in the Investment Banking Division of Morgan
Stanley from 2000 to 2011. While at Morgan Stanley, he led the IPO of AerCap in 2006 and was the lead advisor to the Federal Reserve Bank and the U.S. Treasury on the AIG restructuring and the
placement of the U.S. government-sponsored enterprises Fannie Mae and Freddie Mac into conservatorship in 2008. Prior to joining Morgan Stanley, Mr. Juhas was an attorney in the Mergers and
Acquisitions group at Sullivan & Cromwell LLP, the New York law firm. Mr. Juhas received his A.B. from Harvard College and his J.D. from Harvard Law School.
Philip Scruggs.
Mr. Scruggs assumed the position of President and Chief Commercial Officer of AerCap in May 2014,
previously serving in the
role of Executive Vice President and Chief Marketing Officer at ILFC, where he had a 20-year career. Mr. Scruggs oversees AerCap's worldwide leasing business, including the marketing, pricing,
credit, and commercial execution. Prior to joining ILFC, Mr. Scruggs was an attorney at the Los Angeles-based law firm Paul, Hastings, Janofsky and Walker, where he specialized in leasing and
asset-based finance. Mr. Scruggs received his B.A. from the University of California, Berkeley, and his J.D. from The George Washington University. Mr. Scruggs is an instrument rated
private pilot.
Peter Anderson.
Mr. Anderson assumed the position of Head of Asia Pacific, following the acquisition of ILFC by AerCap,
having previously
served in the role of Vice President Marketing and Deputy Head of APAC at ILFC. Mr. Anderson was responsible for managing ILFC's relationships with key airline customers in South East Asia,
Japan and Korea. Prior to ILFC, Mr. Anderson was Asia Pacific Director of Sales and Marketing for Hong Kong Aviation Capital (HKAC), transitioning the Allco Finance Group Ltd. aviation
assets into the HKAC business and managing those assets across Asia. Prior to HKAC, Mr. Anderson spent eight years at Allco Finance Group Ltd. in both Sydney and London, specializing in
aircraft leasing, structured finance (for aviation assets) and mortgage and equipment lease securitization. Mr. Anderson earned his Master of Applied Finance and Investment from the Securities
Institute of Australia, and his B.A. from the University of Technology Sydney.
Brian Canniffe.
Mr. Canniffe was appointed Group Treasurer of AerCap in January 2018, previously serving as Head of
Investor Relations since
joining the Company in October 2016. He has over 20 years' experience in banking, lending and the capital markets. Prior to joining AerCap, Mr. Canniffe served as Managing Director and
Head of Global Markets Financing for Bank of America Merrill Lynch in Hong Kong and Tokyo, where he led a division that was responsible for providing secured financing, trading, clearing, reporting
and various treasury functions in the Asia Pacific region. Prior to joining Bank of America Merrill Lynch, he held roles within the financing divisions at Nomura Securities and Bankers Trust
International.
Tom Kelly.
Mr. Kelly was appointed Chief Executive Officer of AerCap Ireland in 2010. Mr. Kelly previously served as
Chief Financial
Officer of AerCap's Irish operations and has a substantial aircraft leasing and financial services background. Previously, Mr. Kelly spent ten years with GECAS where his last roles were as
Chief Financial Officer and director of GE Capital Aviation Services (GECAS) Limited, GECAS's Irish operation. Mr. Kelly also served as global controller for GECAS in his role as Senior Vice
President & Controller. Prior to joining GECAS in 1997, Mr. Kelly spent over eight years with KPMG in their London office, as Senior Manager in their financial services practice.
Mr. Kelly is a Chartered Accountant and holds a Bachelor of Commerce degree from University College, Dublin.
Theresa Murray.
Ms. Murray was appointed Head of Human Resources in October 2016. She has over 25 years' experience
across all HR
disciplines. Prior to joining AerCap she held the position of International HR Director at Nuance Communications. Throughout her career she has held a variety of HR and management roles including
senior positions at Telefonica and Lucent Technologies.
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Table of Contents
Edward (Ted) O'Byrne.
Mr. O'Byrne was appointed Chief Investment Officer in January 2011. Previously he held the position
of Head of Portfolio
Management overseeing aircraft trading, OEM relationships and portfolio management activities. Mr. O'Byrne joined AerCap in July 2007 as Vice President Portfolio Management and Trading. Prior
to joining AerCap, he worked as Airline Marketing Manager at Airbus North America and later as Director, Sales Contracts for Airbus Leasing Markets in Toulouse, France. Mr. O'Byrne received his
M.B.A. from the University of Chicago Booth School of Business and his B.A. from EuroMed in France.
Martin Olson.
Mr. Olson assumed the position of Head of OEM Relations following the acquisition of ILFC by AerCap. He
previously served in the
role of Senior Vice President at ILFC. Mr. Olson heads AerCap's OEM Relations Department, responsible for purchasing new aircraft and engines. He joined ILFC in 1995 after ten years with
McDonnell Douglas Aircraft Corporation. Mr. Olson is a graduate of California State University, Fullerton. He holds a Master's degree in Business Administration from the University of Southern
California.
Sean Sullivan.
Mr. Sullivan assumed the position of Head of Americas following the acquisition of ILFC by AerCap,
previously serving in the
role of Senior Vice President and Head of ILFC Americas. In this role, Mr. Sullivan was involved in ILFC's purchase and leaseback business, including strategic direction of the business,
pricing and analysis tools, critical support, and customer evaluation and processes. Mr. Sullivan has more than 20 years' experience in negotiating and managing complicated transactions.
Prior to ILFC, Mr. Sullivan was Director of Allco Aviation, where he oversaw strategic direction and creation of the business plan, focused on growth through purchase and leaseback
transactions. Previously, he held the position of Vice President at Bank of America in the Leasing and Capital group, focused on aviation finance.
Joe Venuto.
Mr. Venuto was appointed Chief Technical Officer of AerCap in February 2012. He previously served in the role
of Senior Vice
President Operations for the Americas at AerCap for four years. From 2004 to 2008, he held the role of Senior Vice President Operations at AeroTurbine, responsible for all technical issues. Prior to
joining AeroTurbine, Mr. Venuto held the role of Senior Director Maintenance at several airlines including Trump Shuttle, Laker Airways and Amerijet International. He has over 30 years'
experience in the aviation industry and he commenced his aviation career as an Airplane and Powerplant technician for Eastern Airlines. Mr. Venuto is a graduate of the College of Aeronautics
and a licensed FAA Airframe and Powerplant Technician.
Kenneth Wigmore.
Mr. Wigmore assumed the position of Head of EMEA following the acquisition of ILFC by AerCap. Previously,
he held the
positions of Chief Marketing Officer, and Head of Marketing for the Americas, overseeing customer relationships in North and South America from January 2008. Mr. Wigmore joined AerCap in April
2003 as Vice President Airline Marketing. Prior to joining AerCap, he worked as Airline Analyst and later as Sales Director, China over a 9 year period with the aircraft manufacturer Fairchild
Dornier. Mr. Wigmore holds a Bachelor of Science degree from Mount Saint Mary's University in Maryland.
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Compensation
Compensation of non-executive directors
We currently pay each non-executive director an annual fee of €95,000 (€200,000 for the Chairman of our Board of
Directors and €115,000 for the Vice Chairman) and pay each of these directors an additional €4,000 per meeting attended in person or €1,000 per meeting
attended by phone. In addition, we pay the chair of the Audit Committee an annual fee of €25,000 and each Audit Committee member will receive an annual fee of €15,000
and a fee of €4,000 per committee meeting attended in person or €1,000 per committee meeting attended by phone. We further pay the non-executive chair of each of the
Nomination and Compensation Committee, the Group Treasury and Accounting Committee and the Group Portfolio and Investment Committee an annual fee of €15,000 and each such committee
member will receive an annual fee of €10,000 and a fee of €4,000 per committee meeting attended in person or €1,000 per committee meeting attended by
phone.
In
addition, our non-executive directors receive an annual equity award as provided for in AerCap's remuneration policy for members of the Board of Directors and in accordance with the
terms of the Equity Incentive Plan 2014. The size of the annual equity award to our non-executive directors increased, effective as of December 31, 2015, following a market compensation
analysis conducted by an independent benefits advisory firm and in accordance with the terms of the Equity Incentive Plan 2014. As of December 31, 2017, our non-executive directors held 45,382
restricted stock units, 15,753 shares of restricted stock and options to acquire a total of 22,941 AerCap ordinary shares; these equity awards have been granted under the AerCap equity incentive
plans, as further described below. All members of the Board of Directors are reimbursed for reasonable costs and expenses incurred in attending meetings of our Board of Directors.
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Executive compensation
The aircraft leasing business is highly competitive. As a global leader in aircraft leasing, we seek to attract and retain the most talented and
successful officers to manage our business and to motivate them with appropriate incentives to execute our strategy and to promote and encourage continued superior performance over a prolonged period
of time, in support of achieving the objectives of long-term value creation and appropriate risk-taking. We have designed our compensation plans to meet these objectives.
|
|
|
Compensation goal
|
|
How goal is accomplished
|
Attract and retain leading executive talent
|
|
Design compensation
elements to enable us to compete effectively for executive talent
|
|
|
Selectively retain
executives acquired through business transactions considering industry and functional knowledge, leadership abilities and fit with Company culture
|
|
|
Perform market
analysis to stay informed of compensation trends and practices
|
Align executive pay with shareholder interests
|
|
Concentrate executive
pay heavily in equity compensation
|
|
|
Require robust equity
ownership and retention
|
|
|
Motivate senior
executives with meaningful incentives to generate long-term returns
|
Pay for performance
|
|
Pay annual bonuses
based on performance against one-year budgeted target set by the Nomination and Compensation Committee
|
|
|
Reward long-term
growth and value creation
|
|
|
Tie long-term incentive
program awards to the achievement of multi-year earnings per share targets set by the Nomination and Compensation Committee
|
|
|
Reward high performers
with above-target pay when predetermined goals are exceeded
|
Manage risk
|
|
Prohibit hedging of
Company securities and pledging of AerCap equity prior to vesting
|
|
|
Emphasize long-term
performance by designing equity award opportunities to minimize short-term focus and influence on compensation payouts
|
|
|
Incentive compensation
for the executive director is subject to clawback provisions under Dutch law
|
During
the year ended December 31, 2017, we paid an aggregate of approximately $9.3 million in cash (base salary and bonuses) and benefits as compensation to our Group
Executive Committee members (Aengus Kelly, Wouter (Erwin) den Dikken, Keith Helming (January 1, 2017 to March 31, 2017), Peter Juhas (as of April 1, 2017) and Philip Scruggs),
including approximately $0.6 million as part of their retirement and pension plans.
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Table of Contents
The
compensation packages of our Group Executive Committee members (other than our Chief Executive Officer) and certain other officers, consisting of base salary, annual bonus and, for
some officers, annual stock bonus, along with other benefits, are determined by the Nomination and Compensation Committee upon the recommendation of the Chief Executive Officer (other than with
respect to his own compensation) on an annual basis. In addition, upon the recommendation of the Chief Executive Officer (other than with respect to his own equity awards), the Nomination and
Compensation Committee may grant long-term equity incentive awards to our officers on a non-recurring basis under our equity incentive plans, as further outlined below. The compensation package of our
Chief Executive Officer, consisting of base salary, annual bonus, annual stock bonus and a long-term equity incentive award, along with other benefits, is determined by the Board of Directors, upon
recommendation of the Nomination and Compensation Committee, in accordance with the remuneration policy approved by the General Meeting of Shareholders.
The
amount of the annual bonus and, if applicable, the amount of the annual stock bonus granted to our Group Executive Committee members and other participating officers are determined
by the Nomination and Compensation Committee (or, in the case of our Chief Executive Officer, the Board of Directors, upon recommendation of the Nomination and Compensation Committee) based on the
Company's performance relative to the U.S. GAAP EPS budget for the relevant year and the personal performance of the individual Group Executive Committee member or other officer involved. The
Company's U.S. GAAP EPS budget and target bonus levels are determined before the beginning of the relevant year. The actual annual bonus amounts and the actual annual stock bonuses are
determined and paid or granted, as the case may be, after the end of the relevant year. As a matter of policy, actual bonus amounts will be below target level in years that the EPS target is not met,
unless specific circumstances require otherwise which, if any, will be disclosed in this annual report. The annual stock bonuses vest after three years, or, if earlier, at the end of the officer's
employment term.
Our
long-term equity incentive program is designed to retain our most talented and successful officers and to incentivize continued superior performance, in accordance with the Company's
long-term objectives, for the benefit of our shareholders and other stakeholders. The majority of the long-term equity awards have vesting periods ranging between three years and five years, and the
vesting of 66.67% of each award is conditional upon the achievement of the Company's U.S. GAAP EPS budget over the multi-year vesting period, as determined by the Board of Directors at the
beginning of the vesting period (33.33% of each award is subject to time-based vesting). The awards will cliff vest, subject to meeting the vesting conditions, at the end of the vesting period,
i.e., there will be no vesting in the interim, and all shares will remain at risk until the end of the vesting period. If the EPS target is not met, then none or only a portion of the
performance-based shares will vest, with the remaining performance-based shares being forfeited. None of the performance-based shares will vest if 84% or less of the EPS target is met, which indicates
the stringency of the program. A portion of the performance-based shares will vest, as specified in the award agreements, if between 84% and 100% of the EPS target is met, and all performance-based
shares will vest if the EPS target is met or exceeded. In the event of a change of control of the Company, the shares will immediately vest. We believe that the design of our long-term equity
incentive program promotes and encourages continued superior performance over a prolonged period of time in support of achieving the objectives of long-term value creation and appropriate risk-taking.
Severance
payments are part of the employment agreements with our Group Executive Committee members. The amount of the pre-agreed severance is based upon calculations in accordance with
their respective age and years of service.
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Table of Contents
The
Company is subject to the Netherlands' Clawback of Bonuses Act. Pursuant to this legislation, bonuses paid to the executive director (and other directors, as defined under the
articles of association, provided they are in charge of day-to-day management) may be clawed back if awarded on the basis of incorrect information. In addition, any bonus that has been awarded to the
executive director (and other directors, as defined under the articles of association, provided they are in charge of day-to-day management) may be reduced if, under the circumstances, payment of the
bonus would be unacceptable. As of December 31, 2017, we did not have any directors other than the executive director who were in charge of day-to-day management.
AerCap equity incentive plans
Under our equity incentive plans, we have granted restricted stock units, restricted stock and stock options, to directors, officers and
employees to attract and retain them on competitive terms, and to incentivize superior performance with a view to creating long-term value for the benefit of the Company, its shareholders and other
stakeholders.
The
table below indicates the equity awards the Company granted to our Group Executive Committee members, and their equity awards that vested in 2017:
|
|
|
|
|
|
|
|
|
|
|
|
2017 Granted
|
|
2017 Vested
|
|
Aengus Kelly (CEO)
|
|
19,358
|
(a)
|
|
14,692
|
(b)
|
|
Wouter (Erwin) den Dikken (COO)
|
|
5,007
|
(c)
|
|
5,763
|
(d)
|
|
Peter Juhas (CFO)
|
|
8,061
|
(c)
|
|
|
|
|
Philip Scruggs (President and CCO)
|
|
330,681
|
(c)
|
|
|
|
|
-
(a)
-
Grant
of 29,682 shares of restricted stock, of which 10,324 were withheld to pay taxes incurred by Mr. Kelly in connection with the grant.
-
(b)
-
Vesting
of shares of restricted stock.
-
(c)
-
Grant
of restricted stock units; payroll tax will be withheld and deducted from the shares to be delivered at vesting, as applicable.
-
(d)
-
Vesting
of 5,763 restricted stock units, of which 2,870 were withheld to pay taxes incurred by Mr. den Dikken in connection with the vesting.
The
table below indicates the years in which equity awards held by our Group Executive Committee members as of December 31, 2017 are due to vest, subject to meeting the applicable
vesting criteria. The awards may comprise restricted stock and restricted stock units, as specified in the paragraph below regarding share ownership.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
Aengus Kelly (CEO)
|
|
1,074,078
|
|
|
571,455
|
|
|
|
|
|
Wouter (Erwin) den Dikken (COO)
|
|
814,212
|
|
|
|
|
|
|
|
|
Peter Juhas (CFO)
|
|
|
|
|
233,061
|
|
|
|
|
|
Philip Scruggs (President and CCO)
|
|
677,998
|
|
|
|
|
|
320,000
|
|
|
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Table of Contents
We require our Group Executive Committee members to own Company ordinary shares having a value equal to at least ten times their annual base salary, in order to
further align their interests with the long-term interests of our shareholders. This threshold amount includes ordinary shares owned outright, vested stock-based equity awards, time-based restricted
stock and time-based restricted stock units, whether or not vested, and any stock-based equity that the executive has elected to defer. New Group Executive Committee members have a five year grace
period to meet this threshold. In addition, each Group Executive Committee member is required to hold, post vesting, 50% of the net shares (after satisfaction of any exercise price or tax withholding
obligations) delivered to him or her pursuant to Company equity awards since January 1, 2007, for so long as such member remains employed by the Company (or, if earlier, until such member
reaches 65 years of age). Sales of Company ordinary shares are conducted with a view to avoiding undue impact on the Company ordinary share price and in compliance with laws and regulations.
Each executive must consult with the Chairman before executing any sale of the Company's ordinary shares.
Our
policies prohibit our directors, officers and employees from trading in Company securities on the basis of material non-public information, or engaging in hedging and other "short"
transactions involving Company securities. In addition, our directors, officers and employees are prohibited from pledging equity incentive awards prior to vesting.
Please
refer to Note 18
Share-based compensation
to our Consolidated Financial Statements included in this annual
report for more details on our equity incentive plans.
Board Practices
General
Our Board of Directors currently consists of eleven directors, ten of whom are non-executive.
As
a foreign private issuer, as defined by the rules promulgated under the Exchange Act, we are not required to have a majority independent Board of Directors under applicable NYSE
rules. Under the Dutch Corporate Governance Code (the "Dutch Code"), for a non-executive director to be considered "independent," he or she (and his or her spouse and immediate relatives) may not,
among other things,
(i)
in the five years prior to his or her appointment, have been an employee or executive director of us or any public
company affiliated with us;
(ii)
in the year prior to his or her appointment, have had an important business relationship with us or any public
company affiliated with us;
(iii)
receive any financial compensation from us other than for the performance of his or her duties as a director or
other than in the ordinary course of business;
(iv)
hold 10% or more of our ordinary shares (including ordinary shares subject to any
shareholder's agreement);
(v)
be a member of the management or Supervisory Board of a company owning 10% or more of our ordinary shares;
(vi)
in
the year prior to his or her appointment, have temporarily managed our day-to-day affairs while the executive director was unable to
discharge his or her duties; or
(vii)
be a member of the management board of a company in which a member of the management board of the company
which he supervises is a supervisory board member. The Dutch Code contains principles and best practices for Dutch companies with listed shares, and requires companies to either comply with the best
practice provisions of the Dutch Code or to explain why they deviate from these best practice provisions. Two of our non-executive directors (out of a total of ten) are affiliated with Waha. However,
we believe the current composition of the Board enables it to operate effectively and independently, also considering the fact that the non-executive directors are carefully selected based upon their
combined experience and expertise.
The
directors are appointed by the general meeting of the shareholders. Our directors may be appointed by the vote of a majority of votes cast at a general meeting of shareholders
provided that our Board of Directors has proposed the appointment. Without a Board of Directors proposal, directors may also be appointed by the vote of a majority of the votes cast at a general
meeting of shareholders if the majority represents at least one-third of our issued capital.
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Table of Contents
Shareholders
may remove or suspend a director by the vote of a majority of the votes cast at a general meeting of shareholders, provided that our Board of Directors has proposed the
removal. Our shareholders may also remove or suspend a director, without there being a proposal by the Board of Directors, by the vote of a majority of the votes cast at a general meeting of
shareholders if the majority represents at least one-third of our issued capital.
Under
our articles of association, the rules for the Board of Directors and the board committees, and Dutch corporate law, the members of the Board of Directors are collectively
responsible for the management, general and financial affairs, policy, and strategy of our company.
The
executive director is our Chief Executive Officer, who is primarily responsible for managing our day-to-day affairs as well as other responsibilities that have been delegated to the
executive director in accordance with our articles of association and our internal rules for the Board of Directors. The non-executive directors supervise the Chief Executive Officer and our general
affairs and provide general advice to our Chief Executive Officer. In performing their duties, the non-executive directors are guided by the interests of the Company and shall, within the boundaries
set by relevant Dutch law, take into account the relevant interests of our shareholders and other stakeholders in AerCap. The internal affairs of the Board of Directors are governed by our rules for
the Board of Directors.
The
Chairman of the Board is obligated to ensure, among other things, that
(i)
each director receives all information about matters
that he or she may deem useful or necessary in connection with the proper performance of his or her duties;
(ii)
each director has sufficient
time for consultation and decision making; and
(iii)
the Board of Directors and the board committees are properly constituted and functioning.
Each
director has the right to cast one vote and may be represented at a meeting of the Board of Directors by a fellow director. The Board of Directors may pass resolutions only if a
quorum of four directors, including our Chief Executive Officer and the Chairman, or, in his absence, the Vice Chairman, are present at the meeting. Resolutions must be passed by a majority of the
votes cast. If there is a tie, the matter will be decided by the Chairman of our Board of Directors, or in his absence, the Vice Chairman. Subject to Dutch law, resolutions of the Board of Directors
may be passed in writing by a majority of the directors in office. Pursuant to Dutch laws and the Board Rules, a director may not participate in discussions or the decision making process on a
transaction or subject in relation to which he or she has a conflict of interest with us. Resolutions to enter into such transactions must be approved by our Board of Directors, excluding such
interested director or directors.
In
2017, the Board of Directors met on nine occasions. Throughout the year, the Chairman of the Board and individual non-executive directors were in close contact with our Chief
Executive Officer and the other Group Executive Committee members. During its meetings and contacts with the Chief Executive Officer and the other Group Executive Committee members, the Board
discussed such topics as AerCap's annual reports and annual accounts for the financial year 2016, topics for the AGM 2017, secured and unsecured financing transactions and AerCap's liquidity position,
AerCap's hedging policies, optimization of AerCap's portfolio of aircraft, global and regional macroeconomic, monetary and political developments and impact on the industry, AerCap key customer
developments, competitive landscape, aircraft valuations, AerCap's backlog of new technology orders with aircraft and engine manufacturers, AerCap shareholder value, AerCap key shareholder
developments, capital allocation strategies and share repurchases, AerCap's corporate and tax structure, completion of the AeroTurbine downsizing, reports from the various Board committees, budgeting
and financial planning, remuneration and compensation, directors' and officers' succession planning, regulatory compliance, culture and values, sustainability and community, governance and risk
management and control.
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Table of Contents
Composition of the Board
The Board members are from diverse professional backgrounds and combine a broad spectrum of experience and expertise with a reputation for
integrity. The Board as a whole possesses a wide range of core competencies, professional backgrounds and skill sets. The Board aims for a diverse composition, in line with the global nature and
identity of the Company and its business, in terms of such factors as nationality, background, gender and age. It is our objective to increase female representation on our Board, as we believe that
greater gender diversity of the Board will have a positive impact. Candidate directors are primarily selected on the basis of core competencies, professional backgrounds and skill sets.
Committees of the Board of Directors
As described above, the Chief Executive Officer is primarily responsible for managing our day-to-day affairs as well as other duties that have
been delegated to the executive director in accordance with our articles of association and our internal rules for the Board of Directors. The Board of Directors has established a Group Executive
Committee, a Group Portfolio and Investment Committee, a Group Treasury and Accounting Committee, an Audit Committee and a Nomination and Compensation Committee.
Group Executive Committee
We maintain a Group Executive Committee, which is tasked with assisting the Chief Executive Officer with regard to the operational management of
the Company, subject to the Chief Executive Officer's ultimate responsibility. It is chaired by our Chief Executive Officer and is comprised of officers appointed by the Nomination and Compensation
Committee. As of December 31, 2017, the members of our Group Executive Committee were Aengus Kelly (Chief Executive Officer), Wouter (Erwin) den Dikken (Chief Operating Officer), Peter Juhas
(Chief Financial Officer) and Philip Scruggs (President & Chief Commercial Officer). The members of the Group Executive Committee assist the Chief Executive Officer in performing his duties and
as such have managerial and policy making functions within the Company in their respective areas of responsibility. Members of the Group Executive Committee regularly attend Board meetings.
Group Portfolio and Investment Committee
Our Group Portfolio and Investment Committee is entrusted with the authority to consent to transactions relating to the acquisition and disposal
of aircraft, engines and financial assets that are in excess of $250 million but less than $600 million, among others. It is chaired by our Chief Financial Officer and is comprised of
non-executive directors and officers appointed by the Nomination and Compensation Committee. As of December 31, 2017, the members of our Group Portfolio and Investment Committee were Peter
Juhas, Aengus Kelly, Salem Al Noaimi, James (Jim) Chapman, Edward (Ted) O'Byrne and Robert (Bob) Warden.
Group Treasury and Accounting Committee
Our Group Treasury and Accounting Committee is entrusted with the authority to consent to debt funding in excess of $250 million but less
than $600 million per transaction, among others. It is chaired by our Chief Financial Officer and is comprised of non-executive directors and officers appointed by the Nomination and
Compensation Committee. As of December 31, 2017, the members of our Group Treasury and Accounting Committee were Peter Juhas, Aengus Kelly, Salem Al Noaimi, Marius Jonkhart, Tom Kelly, Brian
Canniffe and Robert (Bob) Warden.
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Table of Contents
Audit Committee
Our Audit Committee assists the Board of Directors in fulfilling its responsibilities relating to the integrity of our financial statements, our
risk management and internal control arrangements, our compliance with legal and regulatory requirements, the performance, qualifications and independence of external auditors, and the performance of
the internal audit function, among others. The Audit Committee is comprised of non-executive directors who are "independent" as defined by Rule 10A-3 under the Exchange Act. At least one of
them shall have the necessary financial qualifications. As of December 31, 2017, the members of our Audit Committee were James (Jim) Chapman (Chairman), Marius Jonkhart, Richard (Michael)
Gradon and James (Jim) Lawrence.
In
2017, the Audit Committee met on seven occasions. Throughout the year, the members of the Audit Committee were in close contact with our Chief Executive Officer, our Chief Financial
Officer, internal auditors as well as the external auditors. Principal items discussed and reviewed during these Audit Committee meetings and with our Chief Executive Officer and our Chief Financial
Officer included the annual and quarterly financial statements and disclosures, external auditor's reports, external auditor's independence and rotation, activities and results in respect of our
continued compliance with the Sarbanes-Oxley Act, the external auditor's audit plan for 2017, approval of other services rendered by the external auditor, internal audit reports, the internal
auditor's audit plan for 2018, the Company's compliance, risk management policies and integrity and fraud, the expenses incurred by the Company's most senior officers in carrying out their duties, the
Company's tax planning policies, the functioning of the Audit Committee, the audit committee charter and the audit committee cycle. The Audit Committee had several separate sessions with the external
auditor without management being present.
Nomination and Compensation Committee
Our Nomination and Compensation Committee selects and recruits candidates for the positions of Chief Executive Officer, non-executive director
and Chairman of the Board of Directors and recommends their remuneration, bonuses and other terms of employment or engagement to the Board of Directors. In addition, our Nomination and Compensation
Committee approves the remuneration, bonuses and other terms of employment of the Group Executive Committee and certain other officers and appoints members of the Group Executive Committee, the Group
Portfolio and Investment Committee, the Group Treasury and Accounting Committee and recommends candidates for the Audit Committee and plans the succession within the Board of Directors and committees.
It is chaired by the Chairman of our Board of Directors and is further comprised of up to three non-executive directors appointed by the Board of Directors. As of December 31, 2017, the members
of our Nomination and Compensation Committee were Pieter Korteweg (Chairman), Salem Al Noaimi, Paul Dacier and Robert (Bob) Warden.
In
2017, the Nomination and Compensation Committee met on four occasions. At these meetings it discussed and approved succession planning and compensation related occurrences and
developments within the framework of the Board and Committee Rules and our remuneration policy. In addition, various resolutions were adopted outside of these meetings.
None
of our Nomination and Compensation Committee members or our officers has a relationship that would constitute an interlocking relationship with officers or directors of another
entity or insider participation in compensation decisions.
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Table of Contents
Share ownership
The following table presents beneficial ownership of our shares which are held by our directors and Group Executive Committee members as of
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary
shares
(unrestricted)
|
|
Restricted
stock (a)
|
|
Restricted
stock
units (a)(b)
|
|
Ordinary
shares
underlying
options (c)
|
|
Fully diluted
ownership
percentage (d)
|
|
Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pieter Korteweg (Chairman)
|
|
21,012
|
|
|
4,545
|
|
|
12,025
|
|
|
|
|
|
|
*
|
|
|
Aengus Kelly (CEO) (e)
|
|
605,700
|
|
|
1,645,533
|
|
|
|
|
|
|
|
|
|
1.5
|
%
|
|
Salem Al Noaimi
|
|
2,959
|
|
|
376
|
|
|
2,253
|
|
|
3,954
|
|
|
|
*
|
|
|
Homaid Al Shimmari
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
James (Jim) Chapman
|
|
10,619
|
|
|
642
|
|
|
3,965
|
|
|
1,803
|
|
|
|
*
|
|
|
Paul Dacier
|
|
11,001
|
|
|
3,596
|
|
|
6,193
|
|
|
5,728
|
|
|
|
*
|
|
|
Richard (Michael) Gradon
|
|
|
|
|
3,380
|
|
|
7,155
|
|
|
|
|
|
|
*
|
|
|
Marius Jonkhart
|
|
16,178
|
|
|
427
|
|
|
3,394
|
|
|
5,728
|
|
|
|
*
|
|
|
James (Jim) Lawrence
|
|
100,000
|
|
|
|
|
|
3,394
|
|
|
|
|
|
|
*
|
|
|
Michael Walsh
|
|
500
|
|
|
|
|
|
2,253
|
|
|
|
|
|
|
*
|
|
|
Robert (Bob) Warden
|
|
733
|
|
|
2,787
|
|
|
4,750
|
|
|
5,728
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Directors
|
|
768,702
|
|
|
1,661,286
|
|
|
45,382
|
|
|
22,941
|
|
|
|
|
|
|
Group Executive Committee (GEC) Members:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wouter (Erwin) den Dikken (COO)
|
|
205,808
|
|
|
|
|
|
814,212
|
|
|
|
|
|
|
*
|
|
|
Peter Juhas (CFO)
|
|
29,025
|
|
|
|
|
|
233,061
|
|
|
|
|
|
|
*
|
|
|
Philip Scruggs
|
|
|
|
|
667,317
|
|
|
330,681
|
|
|
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Directors and GEC Members
|
|
1,003,535
|
|
|
2,328,603
|
|
|
1,423,336
|
|
|
22,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
*
-
Less
than 1.0%.
-
(a)
-
All
restricted stock and restricted stock units are subject to time-based or performance-based vesting conditions. Of these restricted stock and restricted stock
units, subject to the vesting conditions, 4,319 will vest on January 1, 2018, 42,124 will vest on February 17, 2018, 2,575,333 will vest on May 31, 2018 (or, for part of these,
the date of the AGM in 2018, whichever is the earlier), 20,347 will vest on February 19, 2019, 551,108 will vest on May 31, 2019 (or the date of the AGM in 2019, whichever is the
earlier), 233,061 will vest on September 13, 2019, 320,000 will vest on May 31, 2020 and 5,647 will vest on January 1, 2021.
-
(b)
-
Payroll
tax will be withheld and deducted from the shares to be delivered at the vesting of restricted stock units, as applicable.
-
(c)
-
5,322
of these options expire on December 31, 2020 and carry a strike price of $14.12 per option. 8,604 of these options expire on December 31, 2021
and carry a strike price of $11.29 per option. The remaining 9,015 options expire on December 31, 2022 and carry a strike price of $13.72 per option.
-
(d)
-
Percentage
amount assumes the vesting and exercise of all time-based and performance-based equity awards at target in this table, and no vesting or exercise of any
other equity awards.
-
(e)
-
Mr. Kelly
is our Chief Executive Officer and an Executive Director of the Board.
All
of our ordinary shares have the same voting rights.
The
address for all of our directors and officers is c/o AerCap Holdings N.V., AerCap House, 65 St. Stephen's Green, Dublin 2, Ireland.
80
Table of Contents
Employees
The following table presents the number of employees relating to our aircraft leasing business at each of our principal geographic locations as
of December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
Location
|
|
2017
|
|
2016
|
|
2015
|
|
Dublin, Ireland
|
|
205
|
|
|
159
|
|
|
90
|
|
|
Shannon, Ireland
|
|
75
|
|
|
70
|
|
|
74
|
|
|
Los Angeles, California
|
|
54
|
|
|
60
|
|
|
72
|
|
|
Singapore
|
|
43
|
|
|
44
|
|
|
41
|
|
|
Amsterdam, the Netherlands
|
|
7
|
|
|
45
|
|
|
90
|
|
|
Other (a)
|
|
23
|
|
|
20
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Total (b)
|
|
407
|
|
|
398
|
|
|
385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
employees located in China, France, the United Kingdom, the United Arab Emirates and throughout the United States.
-
(b)
-
Includes
two, ten and seven part-time employees as of December 31, 2017, 2016 and 2015, respectively.
None
of our employees are covered by a collective bargaining agreement, and we believe that we maintain excellent employee relations.
In
addition to the above, as of December 31, 2017, 2016 and 2015, we had nil, 160 and 411 employees, respectively, primarily located in Miami, Florida and Goodyear, Arizona
relating to our AeroTurbine subsidiary.
Item 7. Major Shareholders and Related Party Transactions
Major shareholders
Beneficial holders of 5% or more of our ordinary outstanding shares as of December 31, 2017, based on available public filings, include:
Wellington Management Co. LLP at 8.2% (12,591,388 shares), Greenlight Capital, Inc. at 6.4% (9,768,178 shares) and Donald Smith & Company, Inc. at 5.5% (8,431,177
shares).
In
addition, in the second half of 2014, Waha Capital PJSC entered into sale and funded collar transactions with respect to the entire amount of the ordinary shares they held. We
understand that Waha has the right to acquire, through a call right, up to the same number of shares that are the subject of the funded collar transactions. Based on the most recent SEC filing made by
Waha, we understand that 25,221,483 shares, or 16.5% of our ordinary outstanding shares, are subject to the funded collar transactions and related call right.
We
do not register the jurisdiction of all record holders as this information is not always available. Specifically, the number of record holders in the United States, or in many regions
outside the United States, is not known to the Company and cannot be ascertained from public filings. All of our ordinary shares have the same voting rights.
Related party transactions
Please refer to Note 11
Investments
,
Note 27
Variable interest entities
and Note 28
Related party transactions
to our Consolidated Financial Statements included in this
annual report for further details of transactions and loans between the Company and its related parties.
81
Table of Contents
Item 8. Financial Information
Consolidated statements and other financial information
Please refer to pages F-1 through F-91 of this annual report.
Significant changes
Please refer to Note 32
Subsequent events
to our Consolidated Financial
Statements included in this annual report for a discussion of significant changes.
Item 9. The Offer and Listing
Offer and listing details
Not applicable.
Markets
AerCap's shares are traded on the NYSE under the symbol "AER."
82
Table of Contents
Trading on the New York Stock Exchange
The following table presents, for the periods indicated, the high and low sales prices per ordinary share as reported on the NYSE Composite
Tape:
|
|
|
|
|
|
|
|
|
|
Price per AerCap Holdings N.V.
ordinary share (a)
|
|
|
|
High
|
|
Low
|
|
|
|
($)
|
|
($)
|
|
Annual highs and lows
|
|
|
|
|
|
2013
|
|
39.10
|
|
13.73
|
|
2014
|
|
50.02
|
|
34.38
|
|
2015
|
|
51.50
|
|
37.42
|
|
2016
|
|
45.53
|
|
24.61
|
|
2017
|
|
54.50
|
|
41.54
|
|
2017 and 2016 quarterly highs and lows
|
|
|
|
|
|
Quarter 1 2016
|
|
42.42
|
|
24.61
|
|
Quarter 2 2016
|
|
42.34
|
|
31.45
|
|
Quarter 3 2016
|
|
40.94
|
|
31.66
|
|
Quarter 4 2016
|
|
45.53
|
|
38.20
|
|
Quarter 1 2017
|
|
49.66
|
|
41.54
|
|
Quarter 2 2017
|
|
47.43
|
|
42.35
|
|
Quarter 3 2017
|
|
51.27
|
|
46.23
|
|
Quarter 4 2017
|
|
54.50
|
|
49.07
|
|
2017 monthly highs and lows
|
|
|
|
|
|
January
|
|
44.59
|
|
41.54
|
|
February
|
|
49.66
|
|
43.93
|
|
March
|
|
46.59
|
|
43.63
|
|
April
|
|
46.33
|
|
42.85
|
|
May
|
|
46.95
|
|
42.35
|
|
June
|
|
47.43
|
|
44.21
|
|
July
|
|
50.24
|
|
46.23
|
|
August
|
|
50.79
|
|
47.70
|
|
September
|
|
51.27
|
|
48.13
|
|
October
|
|
53.30
|
|
50.91
|
|
November
|
|
54.50
|
|
49.07
|
|
December
|
|
53.56
|
|
51.18
|
|
2018 monthly highs and lows
|
|
|
|
|
|
January
|
|
55.67
|
|
52.42
|
|
February
|
|
54.58
|
|
49.04
|
|
March (through March 2, 2018)
|
|
49.93
|
|
49.14
|
|
-
(a)
-
Share
prices provided are intraday highs and lows for all periods presented.
On
March 2, 2018, the closing sales price for our ordinary shares on the NYSE as reported on the NYSE Composite Tape was $49.34.
83
Table of Contents
Item 10. Additional Information
Memorandum and articles of association
Set forth below is a summary description of our ordinary shares and related material provisions of our articles of association and of Book 2 of
the Dutch Civil Code ("
Boek 2 van het Burgerlijk Wetboek
"), which governs the rights of holders of our ordinary shares. Please refer to
"Item 6Directors, Senior Management and Employees" for a discussion of Netherlands laws and our internal rules concerning directors' power to vote on proposals in which they are
materially interested.
Ordinary share capital
Pursuant to our articles of association, our ordinary shares may only be held in registered form. All of our ordinary shares are registered in a
register kept by us or on our behalf by our transfer agent. Transfer of registered shares requires a written deed of transfer and the acknowledgment by AerCap, subject to provisions stemming from
private international law. Our ordinary shares are, in general, freely transferable.
Regulatory obligations regarding certain share transactions
AerCap Cash Manager II Limited, which is a member of AerCap, is subject to regulation by the Central Bank of Ireland. As a result, the
acquisition or disposal directly or indirectly of interests in AerCap shares or similar interests may be subject to regulatory requirements involving the Central Bank of Ireland as set out below. The
following disclosure is for information purposes only and AerCap cannot provide Irish legal advice to actual or potential investors. Actual or potential investors in AerCap must obtain their own legal
advice in relation to their position.
Under
the European Union (Markets in Financial Instruments) Regulations 2017 (as amended) (the "MiFID II Regulations"), a person or a group of persons acting in concert proposing
to acquire a direct or indirect holding of ordinary shares or other similar interests in AerCap must give the Central Bank of Ireland prior written notice of such proposed acquisition if the
acquisition would directly or indirectly
(i)
represent 10% or more of the capital or voting rights in AerCap;
(ii)
result in the proportion of
capital or voting rights in AerCap held by such person or persons reaching or exceeding 10%, 20%, 33% or 50% of
the capital or voting rights in AerCap; or
(iii)
in the opinion of the Central Bank of Ireland, make it possible for that person or those persons
to control or exercise a significant influence over the management of AerCap Cash Manager II Limited. Any such proposed acquisition shall not proceed until
(a)
the Central Bank of Ireland has
informed such proposed acquirer or acquirers that it approves such acquisition or
(b)
the period prescribed in Regulation 21 of the MiFID II Regulations has elapsed without the Central Bank of
Ireland having given notice
in writing that it opposes such acquisition. It is important in this regard to note that the validity as a matter of Irish law of affected transactions, if completed without prior notification to, or
assessment by, the Central Bank of Ireland will not be recognized in Ireland. Corresponding provisions apply to the disposal of direct and indirect shareholdings in AerCap except that, in such case,
no approval is required, but prior notice of the disposal must be given to the Central Bank of Ireland. AerCap Cash Manager II Limited is required under the MiFID II Regulations to notify the Central
Bank of Ireland of relevant acquisitions and/or disposals of which it becomes aware.
Issuance of ordinary shares
The General Meeting of Shareholders can resolve upon the issuance of ordinary shares or the granting of rights to subscribe for ordinary shares,
but only upon a proposal by the Board of Directors specifying the price and further terms and conditions. The General Meeting of Shareholders may designate our Board of Directors as the authorized
corporate body for this purpose. Such designation may be for any period of up to five years and must specify the maximum number of ordinary shares that may be issued.
84
Table of Contents
At
the AGM held in 2017, our shareholders resolved to authorize the Board of Directors, for a period of 18 months, to issue ordinary shares or grant rights to subscribe for
ordinary shares
(i)
up to ten percent of the Company's issued share capital; and
(ii)
up
to an additional ten percent of the Company's issued share capital, provided that the shares that may be issued and rights that may be granted pursuant to this second authorization may only be used
for mergers and/or the acquisition of a business or a company.
These
resolutions together authorize the Board of Directors to issue ordinary shares, and grant rights to subscribe for such shares, up to a maximum of 20% of the Company's issued share
capital, subject to the conditions described in these resolutions.
Preemptive rights
Unless limited or excluded by the General Meeting of Shareholders or Board of Directors as described below, holders of ordinary shares have a
pro rata preemptive right to subscribe for ordinary shares that we issue, except for ordinary shares issued for non-cash consideration (contribution in kind) or ordinary shares issued to our
employees.
The
General Meeting of Shareholders may limit or exclude preemptive rights and also designate our Board of Directors as the authorized corporate body for this purpose. At the AGM held in
2017, our shareholders resolved to authorize the Board of Directors to limit or exclude preemptive rights in respect of any issuance of shares or granting of rights to subscribe for shares pursuant to
the authorizations described above in the paragraph Issuance of ordinary shares, which authorization is valid for a period of 18 months.
Repurchase of our ordinary shares
We may acquire our ordinary shares, subject to certain provisions of the laws of the Netherlands and of our articles of association, if the
following conditions are met:
-
-
the General Meeting of Shareholders has authorized our Board of Directors to acquire the ordinary shares, which authorization may be valid for
no more than 18 months;
-
-
our equity, after deduction of the price of acquisition, is not less than the sum of the paid-in and called-up portion of the share capital and
the reserves that the laws of the Netherlands or our articles of association require us to maintain; and
-
-
we would not hold after such purchase, or hold as pledgee, ordinary shares with an aggregate par value exceeding such part of our issued share
capital as set by law from time to time.
At
the AGM held in 2017, our shareholders resolved to authorize the Board of Directors for a period of 18 months
(i)
to
repurchase ordinary shares up to ten percent of the Company's issued share capital; and
(ii)
to repurchase ordinary shares up to an additional
ten percent of the Company's issued share capital, subject to the condition that the number of ordinary shares which the Company may at any time hold in its own capital will not exceed ten percent of
the Company's issued share capital, and certain other conditions described in these resolutions.
Capital reduction and cancellation
The General Meeting of Shareholders may reduce our issued share capital either by cancelling ordinary shares held in treasury or by amending our
articles of association to reduce the par value of the ordinary shares. A resolution to reduce our capital requires the approval of at least an absolute majority of the votes cast and, if less than
one half of the share capital is represented at a meeting at which a vote is taken, the approval of at least two-thirds of the votes cast.
85
Table of Contents
At
the AGM held in 2017, our shareholders resolved to cancel the Company's ordinary shares that may be acquired under the repurchase authorizations described above or otherwise, subject
to determination by our Board of Directors of the exact number of ordinary shares to be cancelled. During 2017, we cancelled 20,000,000 ordinary shares that we had repurchased. In January 2018, we
cancelled 5,000,000 ordinary shares and in March 2018, we cancelled a further 6,000,000 ordinary shares, which were acquired through the share repurchase programs in accordance with the
authorizations obtained from the Company's shareholders.
General Meetings of Shareholders
Our articles of association determine how our AGM and any extraordinary General Meeting of Shareholders are convoked. At least one AGM must be
held every year. Shareholders can exercise their voting rights by submitting their proxy forms or equivalent means prior to a set date in accordance with the procedures indicated in the notice and
agenda of the applicable general meeting of shareholders. Shareholders may exercise their meeting rights in person after notifying us prior to a set date and providing us with appropriate evidence of
ownership of the shares and authority to vote prior to a set date in accordance with the procedures indicated in the notice and agenda of the applicable general meeting of shareholders.
The
rights of shareholders may only be changed by amending our articles of association. A resolution to amend our articles of association is valid if the Board of Directors makes a
proposal amending the articles of association and such proposal is adopted by a simple majority of votes cast.
The
following resolutions require a two thirds majority vote if less than half of the issued share capital is present or represented at the general meeting of
shareholders:
-
-
capital reduction;
-
-
exclusion or restriction of preemptive rights, or designation of the Board of Directors as the authorized corporate body for this purpose; and
-
-
legal merger or legal demerger within the meaning of Title 7 of Book 2 of the Dutch Civil Code.
If
a proposal to amend the articles of association will be considered at the meeting, we will make available a copy of that proposal, in which the proposed amendments will be stated
verbatim.
An
agreement of AerCap to enter into a
(i)
statutory merger whereby AerCap is the acquiring entity; or
(ii)
a legal demerger, with certain limited
exceptions, must be approved by the shareholders.
The
AGM was held on May 5, 2017. The AGM adopted the 2016 annual accounts and voted for all other items which required a vote.
Voting rights
Each ordinary share represents the right to cast one vote at a general meeting of shareholders. All resolutions must be passed with an absolute
majority of the votes validly cast except as set forth above. We are not allowed to exercise voting rights for ordinary shares we hold directly or indirectly.
Any
major change in the identity or character of AerCap or its business must be approved by our shareholders, including:
-
-
the sale or transfer of substantially all our business or assets;
-
-
the commencement or termination of certain major joint ventures and our participation as a general partner with full liability in a limited
partnership ("
commanditaire vennootschap
") or general partnership ("
vennootschap onder firma
"); and
-
-
the acquisition or disposal by us of a participating interest in a company's share capital, the value of which amounts to at least one third of
the value of our assets.
86
Table of Contents
Liquidation rights
If we are dissolved or wound up, the assets remaining after payment of our liabilities will be first applied to pay back the amounts paid up on
the ordinary shares. Any remaining assets will be distributed among our shareholders, in proportion to the par value of their shareholdings. All distributions referred to in this paragraph shall be
made in accordance with the relevant provisions of the laws of the Netherlands.
Dutch statutory squeeze-out proceedings
If a person or a company or two or more group companies within the meaning of Article 2:24b of the Dutch Civil Code acting in concert
holds in total 95% of a Dutch public limited liability company's issued share capital by par value for their own account, the laws of the Netherlands permit that person or company or those group
companies acting in concert to acquire the remaining ordinary shares in the company by initiating statutory squeeze out proceedings against the holders of the remaining shares. The price to be paid
for such shares will be determined by the Enterprise Chamber of the Amsterdam Court of Appeal.
Choice of law and exclusive jurisdiction
Our articles of association provide that the legal relationship among or between us, any of our current or former directors, and any of our
current or former holders of our shares and derivatives thereof, including but not limited to
(i)
actions under statute;
(ii)
actions under the
articles of association, including actions for breach thereof; and
(iii)
actions in tort, shall be governed in each case exclusively by the laws of the Netherlands, unless such legal relationship
does not pertain
to or arise out of the capacities above. Any dispute, suit, claim, pre-trial action or other legal proceeding, including summary or injunctive proceedings, by and between those persons pertaining to
or arising out of their capacities listed above shall be exclusively submitted to the courts of the Netherlands.
Adoption of annual accounts and discharge of management liability
Each year, our Board of Directors must prepare annual accounts within four months after the end of our financial year. The annual accounts must
be made available for inspection by shareholders at our offices within the same period. The annual accounts must be accompanied by an auditor's certificate, a report of the Board of Directors and
certain other mandatory information. The shareholders shall appoint an accountant, as referred to in Article 393 of Book 2 of the Dutch Civil Code, to audit the annual accounts. The annual
accounts are adopted by our shareholders.
The
adoption of the annual accounts by our shareholders does not release the members of our Board of Directors from liability for acts reflected in those documents. Any such release from
liability requires a separate shareholders' resolution.
Registrar and transfer agent
A register of holders of the ordinary shares will be maintained by Broadridge in the United States who also serves as our transfer agent. The
telephone number of Broadridge is 1-800-733-1121.
87
Table of Contents
Risk management and control framework
Our management is responsible for designing, implementing and operating an adequate functioning internal risk management and control framework.
The purpose of this framework is to identify and manage the strategic, operational, financial and compliance risks to which we are exposed, to promote effectiveness and efficiency of our operations,
to promote reliable financial reporting and to promote compliance with laws and regulations. Supervision is exercised by our Audit Committee, as described in "Item 6. Directors, Senior
Management and EmployeesBoard PracticesCommittees of the Board of DirectorsAudit Committee." Our internal risk management and control framework is based on the
COSO framework developed by the Committee of Sponsoring Organizations of the Treadway Commission (2013). The COSO framework aims to provide reasonable assurance regarding effectiveness and efficiency
of an entity's operations, reliability of financial reporting, prevention of fraud and compliance with laws and regulations.
Our
internal risk management and control framework has the following key components:
Planning and control cycle
The planning and control cycle consists of an annual budget and business plan prepared by management and approved by our Board of Directors,
quarterly forecasts, operational reviews and financial reporting.
Risk management and internal controls
We have developed policies and procedures for all areas of our operations, both financial and non-financial, that constitutes a broad system of
internal control. This system of internal control has been developed through a risk-based approach and enhanced with a view to achieving and maintaining full compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act. Our system of internal control is embedded in our standard business practices and is validated through audits performed by our internal auditors and
through management testing of Sarbanes-Oxley Act controls, which is performed with the assistance of external advisors. In addition, senior management personnel and finance managers of our main
operating subsidiaries annually sign a detailed letter of representation with regard to financial reporting, internal controls and ethical principles. Employees working in our finance or accounting
functions are subject to a separate Finance Code of Ethics.
Code of Conduct and Whistleblower Policy
Our Code of Conduct is applicable to all our employees, including the Chief Executive Officer, Chief Financial Officer and controllers. It is
designed to promote honest and ethical conduct and timely and accurate disclosure in our periodic financial results. Our Whistleblower Policy provides for the reporting, if so wished on an anonymous
basis, of alleged violations of the Code of Conduct, alleged irregularities of a financial nature by our employees, directors or other stakeholders, alleged violations of our compliance procedures and
other alleged irregularities without any fear of reprisal against the individual that reports the violation or irregularity.
Compliance procedures
AerCap has various procedures and programs in place designed to ensure compliance with relevant laws and regulations, including anti-insider
trading procedures, anti-bribery procedures, anti-fraud procedures, economic sanctions and export control compliance procedures, anti-money laundering procedures and anti-trust procedures. Our
compliance programs are maintained and supervised by the Chief Compliance Officer, and they include annual training in key compliance areas and annual certifications. The procedures are subject to
regular audits by, or on behalf of, the internal audit function.
88
Table of Contents
Internal auditors
We have an internal audit function in place to provide assurance to the Audit Committee, on behalf of the Board of Directors, and to AerCap's
executive officers, with respect to AerCap's key processes. The internal audit function independently and objectively carries out audit assignments in accordance with the annual internal audit plan,
as approved by the Audit Committee. The head of the internal audit function reports, in line with professional standards of the Institute of Internal Auditors, to the Audit Committee (functional
reporting line) and to our Chief Executive Officer (administrative reporting line). The work of the internal audit department is fully endorsed by the Audit Committee and AerCap's executive officers
and is considered a valuable part of AerCap's system of control and risk management.
Disclosure controls and procedures
The Disclosure Committee assists our Chief Executive Officer and Chief Financial Officer in overseeing our financial and non-financial
disclosure activities and to ensure compliance with applicable disclosure requirements arising under U.S. and Dutch law and regulatory requirements. The Disclosure Committee obtains information for
its recommendations from the operational and financial reviews, letters of representation which include a risk and internal controls self-assessment, input from the documentation and assessment of our
internal controls over financial reporting and input from risk management activities during the year along with various business reports. The Disclosure Committee comprises various members of senior
management.
External auditors
Our external auditor is responsible for auditing the financial statements. Following the recommendation by the Audit Committee and upon proposal
by the Board of Directors, the General Meeting of Shareholders appoints each year the auditor to audit the financial statements of the current financial year. The external auditor reports to our Board
of Directors and the Audit Committee of our Board of Directors. The external auditor is present at the meetings of the Audit Committee when our quarterly and annual results are discussed.
At
the request of the Board of Directors and the Audit Committee, the Chief Financial Officer and the Internal Audit department review, in advance, each service to be provided by the
auditor to identify any possible breaches of the auditor's independence. The Audit Committee pre-approves every engagement of our external auditor. In accordance with applicable regulations, the
partner of the external audit firm in charge of the audit activities is subject to rotation requirements.
Material contracts
We have entered into several credit facilities and other financing arrangements to fund our acquisition of our aircraft. See
Note 15
Debt
to our Consolidated Financial Statements included in this annual report for more information regarding our credit
facilities and financing arrangements.
Exchange controls
There are no limits under the laws of the Netherlands or in our articles of association on non-residents of the Netherlands holding or voting
our ordinary shares. Currently, there are no exchange controls under the laws of the Netherlands on the conduct of our operations or affecting the remittance of dividends.
Taxation
Effective as of February 1, 2016, we moved our headquarters and principal executive officers from Amsterdam, the Netherlands to Dublin,
Ireland. From that date forward, AerCap Holdings N.V. has been managed and controlled from Ireland. As a result of the application of the tax treaty between the Netherlands and Ireland, we are
no longer considered a resident of the Netherlands for tax purposes but instead a resident of Ireland for tax purposes.
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Irish tax considerations
The following is a general summary of certain Irish tax consequences applicable to both Irish tax resident and non-Irish residents as a result
of the holding and disposal of ordinary shares where and while we are considered a resident of Ireland for the purposes of Irish tax from February 1, 2016 onward. This summary is based on
existing Irish law and our understanding of the practices of the Irish Revenue Commissioners as of the date of this annual report. Legislative, administrative or judicial changes may modify the tax
consequences described below. The discussion below is included for general information purposes only.
Please
note that this summary does not constitute tax advice and is intended only as a general guide. Furthermore, this information applies only to our shares that are held as capital
assets and does not apply to all categories of shareholders, such as dealers in securities, trustees, insurance companies, collective investment schemes or shareholders who have, or who are deemed to
have, acquired their shares by virtue of an office or employment.
This
summary is not exhaustive and shareholders should consult their own tax advisers as to the tax consequences of acquiring, holding and disposing our ordinary shares in their
particular circumstances.
Dividend withholding tax
Irish dividend withholding tax ("DWT"), (currently at a rate of 20%) will arise in respect of dividends or other distributions (including deemed
distributions) we pay unless an exemption applies. A deemed distribution for these purposes would include, among other things, a payment made on the redemption, repayment or purchase of its own shares
by a company except for such payments made by a quoted company in certain circumstances. Where DWT does arise in respect of dividends, the Company is responsible for deducting DWT at source and
forwarding the relevant payment to the Irish Revenue Commissioners.
An
exemption from DWT is available on dividend payments made to certain non-Irish tax resident shareholders ("Exempt Non-Resident Shareholders"). Exempt Non-Resident Shareholders must be
resident in a Relevant Territory (i.e. a country with which Ireland has a double tax treaty), which includes the United States and member states of the EU (other than Ireland). Exempt
Non-Resident Shareholders include:
-
-
individual shareholders (not being a company) who are not tax resident in Ireland and who are resident for the purposes of tax in a Relevant
Territory;
-
-
corporate shareholders resident for the purposes of tax in a Relevant Territory and which are not controlled (directly or indirectly) by Irish
tax residents;
-
-
corporate shareholders that are not resident in Ireland for the purposes of tax, which are under the direct or indirect control of persons who
are resident for the purposes of tax in a Relevant Territory and are not under the ultimate control of persons not resident in a Relevant Territory; or
-
-
corporate shareholders, that are not resident for tax purposes in Ireland, the principal class of shares of which (or of its 75% parent or
where wholly owned by two or more companies, each such company) is substantially and regularly traded on a stock exchange in Ireland, a recognized stock exchange in a Relevant Territory or on such
other stock exchange approved by the Irish Minister for Finance (which includes the New York Stock Exchange),
and
provided that, in all cases noted above (but subject to the exception in the paragraph below regarding "U.S. resident shareholders"), the Exempt Non-Resident Shareholder has provided a relevant
DWT declaration, as prescribed by the Irish Revenue Commissioners, to his or her broker before the record date for the dividend, and the relevant information is further transmitted to the Company (in
the case of shares held through the Depository Trust Company ("DTC")) or to our transfer agent (in the case of shares held outside of the DTC).
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A simplified DWT exemption procedure exists for U.S. resident shareholders who hold their shares in the Company through the DTC. The simplified
procedures provide that such shareholders are not required to complete the Irish Revenue Commissioners' DWT declaration form but can still avail of the exemption from DWT provided the address of the
beneficial owner of the shares in the records of the broker is in the United States. We strongly recommend that such shareholders ensure that their information has been properly recorded by their
brokers. In order for this simplified procedure to apply, the dividends must be paid via a "qualifying intermediary" as discussed further below.
Dividends
paid in respect of shares in an Irish resident company that are owned by residents of the United States and held outside of the DTC will not be subject to DWT provided that the
shareholder has completed the relevant DWT declaration form and this declaration form remains valid. Such shareholders must provide the relevant DWT declaration form to our transfer agent at least
seven business days before the record date for the first dividend payment to which they are entitled.
If
a U.S. resident shareholder receives a dividend subject to DWT, that shareholder should generally be able to make an application for a refund of DWT from the Irish Revenue
Commissioners, subject to certain time limits.
A distribution made by the Company to a "qualifying intermediary" (for example a bank or stockbroking firm) approved by the Irish Revenue
Commissioners is exempt from DWT if the ultimate beneficial owner is an Exempt Non-Resident Shareholder. In such instances, the qualifying intermediary is required to identify the person who is
beneficially entitled to the distribution and to ensure that the prescribed declarations are in place in advance of the dividend payment, or in the case of U.S. residents which hold our shares through
the DTC, that the address of the beneficial owner of the shares is in the United States. The Company must apply DWT to a distribution unless it has been notified by the qualifying intermediary that
the distribution to be received by the qualifying intermediary is for the benefit of an Exempt Non-Resident Shareholder.
Prior
to paying any dividend, the Company intends to put in place an agreement with an entity which is recognized by the Irish Revenue Commissioners as a "qualifying intermediary," such
that any dividends paid by the Company will be paid via a qualifying intermediary.
Shareholders that do not fall within one of the categories mentioned above may fall within other exemptions from DWT. If a shareholder is exempt
from DWT but receives a dividend subject to DWT, that shareholder may be able to claim a refund of DWT from the Irish Revenue Commissioners subject to certain time limits.
Irish tax resident or ordinarily resident individual shareholders will generally be subject to DWT in respect of dividends or distributions
received from an Irish resident company (with
some limited exemptions). Irish tax resident individual shareholders will be allowed a tax credit for the amount of DWT suffered on the dividend against their Irish income tax charge on the dividend
income. Irish tax resident corporate shareholders will generally be entitled to claim an exemption from DWT.
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Irish tax resident or ordinarily resident shareholders that are entitled to receive dividends without DWT must complete the relevant DWT declaration form, as
prescribed by the Irish Revenue Commissioners, and provide the declaration form to their brokers before the record date for the first dividend to which they are entitled (in the case of shares held
through the DTC), or to our transfer agent at least seven business days before such record date (in the case of shares held outside of the DTC).
Irish
tax resident or ordinarily resident individual shareholders who are not entitled to an exemption from DWT and who are subject to Irish tax should consult their own tax adviser.
Irish income tax on dividends
A shareholder who is not resident or ordinarily resident for tax purposes in Ireland and who is entitled to an exemption from DWT, generally has
no liability to Irish income tax on a dividend from an Irish resident company unless that shareholder holds the shares through a branch or agency which carries on a trade in Ireland.
A
shareholder who is not resident or ordinarily resident for tax purposes in Ireland and who is not entitled to an exemption from DWT, generally has no additional liability to Irish
income tax unless that shareholder holds the shares through a branch or agency which carries on a trade in Ireland. The shareholder's liability to Irish tax on the dividend is effectively limited to
the amount of DWT already deducted by the Company.
Irish tax resident or ordinarily resident individual shareholders may be subject to Irish income tax and income charges such as pay related
social insurance ("PRSI") and the Universal Social Charge ("USC") on the gross amount of any dividends received from the Company, with a credit allowed for any DWT suffered on the dividend. Such
shareholders should consult their own tax adviser. Irish tax resident corporate shareholders should generally not be subject to Irish corporation tax on dividends from the Company.
Irish stamp duty
Irish stamp duty will generally not be payable on transactions for cash in the Company's shares, unless the transfer of the shares is related to
either immoveable property situated in Ireland or any interest in such property or to shares or marketable securities of an Irish incorporated company. In such cases a 1% stamp duty charge will arise
for the acquirer based on the transfer consideration for the shares.
Irish tax on chargeable gains
A disposal of our shares by a shareholder who is not resident or ordinarily resident for tax purposes in Ireland should not give rise to Irish
tax on any chargeable gain realized on such disposal unless such shares are used, held or acquired for the purposes of a trade carried on by such shareholder through a branch or agency in Ireland.
A disposal of our shares by an Irish tax resident or ordinarily resident shareholder may, depending on the circumstances (including the
availability of exemptions and reliefs), give rise to a chargeable gain or allowable loss for that shareholder. Any such gain or loss must be calculated in euro. The rate of capital gains tax in
Ireland is currently 33%. Depending on the individual circumstances, unutilized capital losses from other sources may be available to reduce gains realized on the disposal of our shares.
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A
holder of our shares who is an Irish tax resident individual and becomes temporarily non-resident in Ireland may, under Irish anti-avoidance legislation, be liable to Irish tax on any
chargeable gain realized on a disposal during the period in which such individual is non-resident.
Irish capital acquisitions tax
On a gift or inheritance of our shares, Irish capital acquisitions tax ("CAT"), will arise where either the disponer and/or the recipient is tax
resident or ordinary resident in Ireland. Special rules with regard to residence apply where an individual is not domiciled in Ireland. Where both the disponer and the recipient are not Irish tax
resident or ordinary resident, Irish CAT may still arise on a gift or inheritance of shares in the Company, if they are deemed to be situated in Ireland at the time. The current rate of Irish CAT for
gifts and inheritances is 33% and there are various thresholds which apply before CAT becomes applicable.
The
Estate Tax convention between Ireland and the United States generally provides for Irish CAT paid on inheritances in Ireland to be credited, in whole or in part, against tax payable
in the United States, in the case where an inheritance of shares is subject to both Irish CAT and U.S. Federal Estate Tax. The Estate Tax Convention does not apply to Irish CAT paid on gifts.
U.S. tax considerations
Subject to the limitations and qualifications stated herein, this discussion sets forth the material U.S. federal income tax consequences of the
purchase, ownership and disposition of the ordinary shares. The discussion of the holders' tax consequences addresses only those persons that hold those ordinary shares as capital assets for U.S.
federal income tax purposes and does not address the tax consequences to any special class of holder, including without limitation, holders of (directly, indirectly or constructively) 10% or more of
the total combined voting power, if any, of our ordinary shares, dealers in securities or currencies, banks, tax-exempt organizations, life insurance companies, financial institutions, broker dealers,
regulated investment companies, real estate investment trusts, traders in securities that elect the mark-to-market method of accounting for their securities holdings, persons that hold securities that
are a hedge or that are hedged against currency or interest rate risks or that are part of a straddle, conversion or "integrated" transaction, certain U.S. expatriates, partnerships or other entities
classified as partnerships for U.S. federal income tax purposes and U.S. Holders whose functional currency for U.S. federal income tax purposes is not the U.S. dollar. This discussion does not address
the effect of the U.S. federal alternative minimum tax or any state, local or foreign tax laws on a holder of ordinary shares. The discussion is based on the Code, its legislative history, existing
and proposed regulations thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly with retroactive effect.
For
purposes of this discussion, a "U.S. Holder" means a beneficial owner of ordinary shares that is for U.S. federal income tax purposes an individual citizen or resident of the U.S.; a
U.S. corporation, or other entity taxable as a corporation, created or organized in or under the laws of the United States or any political subdivision thereof; a trust if the trust
(i)
is subject
to the primary supervision of a U.S. court and one or more U.S. persons are able to control all substantial decisions of the
trust; or
(ii)
has elected to be treated as a U.S. person; or an estate the income of which is subject to U.S. federal income tax regardless of
its source. A "non-U.S. Holder" is a beneficial owner of our ordinary shares that is neither a U.S. Holder nor a partnership for U.S. federal income tax purposes.
If
an entity or arrangement that is treated as a partnership for U.S. federal income tax purposes holds the shares, the U.S. federal income tax treatment of a partner will generally
depend on the status of the partner and activities of the partnership. Partnerships holding shares and partners therein should consult their own tax advisors as to the particular U.S. federal income
tax consequences of acquiring, owning and disposing of the shares.
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Cash dividends and other distributions
A U.S. Holder of ordinary shares generally will be required to treat distributions received with respect to such ordinary shares (including any
amounts withheld) as dividend income to the extent of AerCap's current or accumulated earnings and profits (computed using U.S. federal income tax principles), with the excess treated as a non-taxable
return of capital to the extent of the holder's adjusted tax basis in the ordinary shares and, thereafter, as capital gain, subject to the PFIC rules discussed below. Dividends paid to a U.S. Holder
that is a corporation are not eligible for the dividends received deduction available to corporations. Current tax law provides for a maximum 20% U.S. tax rate on the dividend income of an individual
U.S. Holder with respect to dividends paid by a domestic corporation or "qualified foreign corporation" if certain holding period requirements are met. A qualified foreign corporation generally
includes a foreign corporation (other than a PFIC) if
(i)
its ordinary shares are readily tradable on an established securities market in the
United States; or
(ii)
it is eligible for benefits under a comprehensive U.S. income tax treaty. The ordinary shares are expected to be readily
traded on the NYSE. As a result, assuming we are not treated as a PFIC, we should be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares and, therefore,
dividends paid to an individual U.S. Holder with respect to ordinary shares for which the requisite holding period is satisfied should be taxed at a maximum federal tax rate of 20%.
Distributions
to U.S. Holders of additional ordinary shares or preemptive rights with respect to ordinary shares that are made as part of a
pro
rata
distribution to all of our shareholders generally will not be subject to U.S. federal income tax, but in other circumstances may constitute a taxable dividend.
Distributions
paid in a currency other than U.S. dollars will be included in a U.S. Holder's gross income in a U.S. dollar amount based on the spot exchange rate in effect on the date of
actual or constructive receipt whether or not the payment is converted into U.S. dollars at that time. The U.S. Holder will have a tax basis in such currency equal to such U.S. dollar amount, and any
gain or loss recognized upon a subsequent sale or conversion of the foreign currency for a different U.S. dollar amount will be U.S. source ordinary income or loss. If the dividend is converted into
U.S. dollars on the date of receipt, a U.S. Holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.
Subject
to applicable limitations that may vary depending upon the circumstances, foreign taxes withheld from dividends on ordinary shares, to the extent the taxes do not exceed those
taxes that would have been withheld had the holder been eligible for and actually claimed the benefits of any reduction in such taxes under applicable law or tax treaty, will be creditable against the
U.S. Holder's federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules governing foreign tax
credits are complex and, therefore, prospective purchasers of ordinary shares should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.
Instead of claiming a credit, a U.S. Holder may, at his election, deduct such otherwise creditable foreign taxes in computing his taxable income, subject to generally applicable limitations under U.S.
law.
A
non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on dividends paid with respect to ordinary shares unless such income is effectively connected
with the conduct by the non-U.S. Holder of a trade or business within the United States.
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Sale or disposition of ordinary shares
A U.S. Holder generally will recognize gain or loss on the taxable sale or exchange of the ordinary shares in an amount equal to the difference
between the U.S. dollar amount realized on such sale or exchange (determined in the case of shares sold or exchanged for currencies other than U.S. dollars by reference to the spot exchange rate in
effect on the date of the sale or exchange or, if the ordinary shares sold or exchanged are traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing
accrual basis taxpayer, the spot exchange rate in effect on the settlement date) and the U.S. Holder's adjusted tax basis in the ordinary shares determined in U.S. dollars. The initial tax basis of
the ordinary shares to a U.S. Holder will be the U.S. Holder's U.S. dollar purchase price for the shares (determined by reference to the spot exchange rate in effect on the date of the purchase, or if
the shares purchased are traded on an established securities market and the U.S. Holder is a cash basis taxpayer or an electing accrual basis taxpayer, the spot exchange rate in effect on the
settlement date). Assuming that AerCap is not a PFIC and has not been treated as a PFIC during your holding period for our ordinary shares, such gain or loss will be capital gain or loss and will be
long-term gain or loss if the ordinary shares have been held for more than one year. Under current law, the maximum long-term capital gain rate for an individual U.S. Holder is 20%. The deductibility
of capital losses is subject to limitations. Capital gain or loss, if any, recognized by a U.S. Holder generally will be treated as U.S. source income or loss for U.S. foreign tax credit purposes.
A
non-U.S. Holder of ordinary shares will not be subject to United States income or withholding tax on gain from the sale or other disposition of ordinary shares unless
(i)
such gain is effectively
connected with the conduct of a trade or business within the United States; or
(ii)
the non-U.S. Holder is an individual who is present in the United States for at least 183 days during the
taxable year of the
disposition and certain other conditions are met.
Potential application of PFIC provisions
We do not believe we will be classified as a PFIC for 2017. We cannot yet make a determination as to whether we will be classified as a PFIC for
2018 or subsequent years. In general, a non-U.S. corporation will be classified as a PFIC for U.S. federal income tax purposes in any taxable year in which, after applying certain look-through rules,
either
(i)
at least 75% of its gross income is "passive income;" or
(ii)
at least 50% of
the average value of its gross assets is attributable to assets that produce "passive income" or are held for the production of "passive income." Passive income for this purpose generally includes
dividends, interest, royalties, rents and gains from commodities, foreign currency and securities transactions. Certain exceptions are provided, however, for rental income derived in the active
conduct of a business.
The
determination as to whether a foreign corporation is a PFIC is a complex determination that is based on all of the relevant facts and circumstances and that depends on the
classification of various assets and income under applicable rules. It is unclear how some of these rules apply to us. Further, this determination must be tested annually at the end of the taxable
year and, while we intend to conduct our affairs in a manner that will reduce the likelihood of our becoming a PFIC, our circumstances may change or our business plan may result in our engaging in
activities that could cause us to become a PFIC. Accordingly, there can be no assurance that we will not be classified as a PFIC for the current taxable year or any future taxable year.
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If
we are or become a PFIC in a taxable year in which we pay a dividend or the prior taxable year, the dividend rate discussed above with respect to dividends paid to non-corporate
holders would not apply. If we are a PFIC, subject to the discussion of the mark-to-market election and the qualified electing fund election below, a U.S. Holder of ordinary shares will be subject to
additional tax and an interest charge on "excess distributions" received with respect to the ordinary shares or gains realized on the disposition of such ordinary shares. Such a U.S. Holder will have
an excess distribution if distributions during any tax year exceed 125% of the average amount received during the three preceding tax years (or, if shorter, the U.S. Holder's holding period). A U.S.
Holder may realize gain on an ordinary share not only through a sale or other disposition, but also by pledging the ordinary share as security for a loan or entering into certain constructive
disposition transactions. To compute the tax on an excess distribution or any gain,
(i)
the excess distribution or gain is allocated ratably over
the U.S. Holder's holding period;
(ii)
the amount allocated to the current tax year and amounts allocated to any year before the first year in
which we are a PFIC is taxed as ordinary income in the current tax year; and
(iii)
the amount allocated to each previous tax year (other than any
year before the first year in which we are a PFIC) is taxed at the highest applicable marginal rate in effect for that year and an interest charge is imposed to recover the deemed benefit from the
deferred payment of the tax. These rules effectively prevent a U.S. Holder from treating the gain realized on the disposition of an ordinary share as capital gain.
If
we are a PFIC and our ordinary shares are "regularly traded" on a "qualified exchange," a U.S. Holder may make a mark-to-market election, which may mitigate the adverse tax
consequences resulting from AerCap's PFIC status. The ordinary shares will be treated as "regularly traded" in any calendar year during which more than a
de
minimis
quantity of ordinary shares are traded on a qualified exchange on at least 15 days during each calendar quarter. The NYSE, on which the ordinary shares are
expected to be regularly traded, is a qualified exchange for U.S. federal income tax purposes.
If
a U.S. Holder makes the mark-to-market election, for each year in which we are a PFIC the holder generally will include as ordinary income the excess, if any, of the fair market value
of the ordinary shares at the end of the taxable year over their adjusted basis, and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of the ordinary shares
over their fair market value at the end of the taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). If a U.S. Holder makes
the election, his basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain recognized on the sale or other disposition of ordinary shares, for which the
mark-to-market election has been made, will generally be treated as ordinary income.
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Alternatively,
if we become a PFIC in any year, a U.S. Holder of ordinary shares may wish to avoid the adverse tax consequences resulting from our PFIC status by making a qualified
electing fund ("QEF") election with respect to our ordinary shares in such year. If a U.S. Holder makes a QEF election, the holder will be required to include in gross income each year
(i)
as
ordinary income, its
pro rata
share of our earnings and profits in excess of net capital
gains; and
(ii)
as long-term capital gains, its pro rata share of our net capital gains, in each case, whether or not cash distributions are
actually made. The amounts recognized by a U.S. Holder making a QEF election generally are treated as income from sources outside the U.S. If, however, U.S. Holders hold at least half of the ordinary
shares, a percentage of our income equal to the proportion of our income that we receive from U.S. sources will be U.S. source income for the U.S. Holders of ordinary shares. Because a U.S. Holder of
shares in a PFIC that makes a QEF election is taxed currently on its pro rata share of our income, the amounts recognized will not be subject to tax when they are distributed to the U.S. Holder. An
electing U.S. Holder's basis in the ordinary shares will be increased by any amounts included in income currently as described above and decreased by any amounts not subjected to tax at the time of
distribution. If we are or become a PFIC, a U.S. Holder would make a QEF election in respect of its ordinary shares by attaching a properly completed IRS Form 8621 in respect of such shares to
the holder's timely filed U.S. federal income tax return. For any taxable year that we determine that we are a PFIC, we will
(i)
provide notice
of our status as a PFIC as soon as practicable following such taxable year; and
(ii)
comply with all reporting requirements necessary for U.S.
Holders to make QEF elections, including providing to shareholders upon request the information necessary for such an election.
Although
a U.S. Holder normally is not permitted to make a retroactive QEF election, a retroactive election (a "retroactive QEF election") may be made for a taxable year of the U.S.
Holder (the "retroactive election year") if the U.S. Holder
(i)
reasonably believed that, as of the date the QEF election was due, the foreign
corporation was not a PFIC for its taxable year that ended during the retroactive election year; and
(ii)
to the extent provided for in
applicable Treasury Regulations, filed a protective statement with respect to the foreign corporation, applicable to the retroactive election year, in which the U.S. Holder described the basis for its
reasonable belief and extended the period of limitation on the assessment of taxes for all taxable years of the shareholder to which the protective statement applies. If required to be filed to
preserve the U.S. Holder's ability to make a retroactive QEF election, the protective statement must be filed by the due date of the investor's return (including extensions) for the first taxable year
to which the statement is to apply. U.S. Holders should consult their own tax advisors regarding the advisability of filing a protective statement.
As
discussed above, if we are a PFIC, a U.S. Holder of ordinary shares that makes a QEF election (including a proper retroactive QEF election) will be required to include in income
currently its pro rata share of our earnings and profits whether or not we actually distribute earnings. The use of earnings to fund reserves or pay down debt or to fund other investments could result
in a U.S. Holder of ordinary shares recognizing income in excess of amounts it actually receives. In addition, our income from an investment for U.S. federal income tax purposes may exceed the amount
we actually receive. If we are a PFIC and a U.S. Holder makes a valid QEF election in respect of its ordinary shares, such holder may be able to elect to defer payment, subject to an interest charge
for the deferral period, of the tax on income recognized on account of the QEF election. Prospective purchasers of ordinary shares should consult their own tax advisors about the advisability of
making a QEF election, protective QEF election and deferred payment election.
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Miscellaneous
itemized deductions of an individual U.S. person can only be deducted to the extent that all of such person's miscellaneous itemized deductions exceed 2% of its adjusted
gross income. In addition, an individual's miscellaneous itemized deductions are not deductible for purposes of computing the alternative minimum tax. Certain expenses of AerCap might be a
miscellaneous itemized deduction if incurred by an individual. A U.S. person that owns an interest in a "pass-through entity" is treated as recognizing income in an amount corresponding to its share
of any item of expense that would be a miscellaneous itemized deduction and as separately deducting that item subject to the limitations described above. If it is determined that we are a PFIC, the
IRS could take the position that we are a "pass-through entity" with respect to a U.S. Holder of ordinary shares that makes a QEF election.
Special
rules apply to determine the foreign tax credit with respect to withholding taxes imposed on distributions on shares in a PFIC. If a U.S. Holder owns ordinary shares during any
year in which we are a PFIC, such holder must file IRS Form 8621.
We
urge prospective purchasers of ordinary shares to consult their own tax advisors concerning the tax considerations relevant to an investment in a PFIC, including the availability and
consequences of making the mark-to-market election and QEF election discussed above.
Additional tax on net investment income
Certain U.S. Holders that are individuals, trusts or estates may be subject to a 3.8% tax, in addition to otherwise applicable U.S. federal
income tax, on the lesser of
(i)
the U.S. Holder's "net investment income" (or undistributed "net investment income," in the case of a trust or
estate) for the relevant taxable year; and
(ii)
the excess of the U.S. Holder's modified adjusted gross income (or adjusted gross income, in the
case of a trust or estate) for the relevant taxable year above a certain threshold (which in the case of an individual ranges from $125,000 to $250,000, depending on the individual's circumstances). A
U.S. Holder's "net investment income" generally includes, among other things, dividend income on and capital gain from the disposition of shares, subject to certain exceptions. Holders should consult
their own tax advisors regarding the applicability of this tax to the ordinary shares.
Information reporting and backup withholding
Information reporting to the U.S. IRS generally will be required with respect to payments on the ordinary shares and proceeds of the sale of the
ordinary shares paid to holders that are U.S. taxpayers, other than certain corporations and other exempt recipients. A 28% "backup" withholding tax may apply to those payments if such a holder fails
to provide a taxpayer identification number to the paying agent and to certify that no loss of exemption from backup withholding has occurred. Holders that are not subject to U.S. taxation may be
required to comply with applicable certification procedures to establish that they are not U.S. taxpayers in order to avoid the application of such information reporting requirements and backup
withholding. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited against the holder's U.S. federal income tax liability, if any, provided
the required information is furnished to the U.S. IRS.
The above discussion is a general summary. It does not cover all tax matters that may be of importance to particular investors. All prospective investors are
strongly urged to consult their own tax advisors about the tax consequences of an investment in our ordinary shares.
98
Table of Contents
Dividends
Dividends may in principle only be paid out of profit as shown in the adopted annual accounts. We will only have power to make distributions to
shareholders and other persons entitled to distributable profits to the extent our equity exceeds the sum of the paid and called up portion of the ordinary share capital and the reserves that must be
maintained in accordance with provisions of the laws of the Netherlands or our articles of association. The profits must first be used to set up and maintain reserves required by law and must then be
set off against certain financial losses. We may not make any distribution of profits on ordinary shares that we hold and have not done so in the past. Our Board of Directors determines whether and
how much of the remaining profit it will reserve, and, if the Board of Directors determines that not all of the remaining profit is reserved, the manner and date of a dividend distribution, and
notifies shareholders.
All
calculations to determine the amounts available for dividends will be based on our annual Dutch GAAP statutory accounts, which may be different from our Consolidated Financial
Statements under U.S. GAAP, such as those included in this annual report. Our statutory accounts have to date been prepared, and will continue to be prepared, under Dutch GAAP and are deposited
with the Commercial Register in Amsterdam, the Netherlands. Our net income attributable to equity holders of AerCap Holdings N.V. for the year ended December 31, 2016 and our total
AerCap Holdings N.V. shareholders' equity as of December 31, 2016 as set forth in our annual statutory accounts were $914.5 million and $8,161.9 million, respectively. We
are dependent on dividends or other advances from our operating subsidiaries to fund any dividends we may pay on our ordinary shares.
Documents on display
You may read and copy any document we file with or furnish to the SEC, including this report, at the SEC's Public Reference Room at
100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of the documents at prescribed rates by writing to the Public Reference Section of the SEC at
100 F Street, N.E., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 to obtain information on the operation of the Public Reference Room. In addition, the SEC maintains
an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. You can review our SEC filings, including this
annual report, by accessing the SEC's Internet website at
www.sec.gov
. In addition, you may inspect material we file at the offices of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005.
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Our primary market risk exposure is interest rate risk associated with short- and long-term borrowings bearing variable interest rates and lease
payments under leases tied to floating interest rates. To manage this interest rate exposure, from time to time, we enter into interest rate swap and cap agreements. We are also exposed to foreign
currency risk, which can adversely affect our operating profits. To manage this risk, from time to time, we enter into forward exchange contracts.
The
following discussion should be read in conjunction with Note 12
Derivative assets
and
Note 15
Debt
to our Consolidated Financial Statements included in this annual report, which provide further information on our debt
and derivative financial instruments.
99
Table of Contents
Interest rate risk
Interest rate risk is the exposure to changes in the level of interest rates and the spread between different interest rates. Interest rate risk
is highly sensitive to many factors, including government monetary policies, global economic factors and other factors beyond our control.
We
enter into leases with rents that are based on fixed and variable interest rates, and we fund our operations primarily with a mixture of fixed and floating rate debt. Interest rate
exposure arises when there is a mismatch between terms of the associated debt and interest earning assets, primarily between floating rate debt and fixed rate leases. We manage this exposure primarily
through the use of interest rate caps, interest rate swaps and interest rate floors using a cash flow-based risk management model. This model takes the expected cash flows generated by our assets and
liabilities and then calculates by how much the value of these cash flows will change for a given movement in interest rates.
The
principal amount of our outstanding floating rate debt was approximately $8.9 billion, or approximately 31% of the total principal amount of our outstanding indebtedness as of
December 31, 2017. If interest rates were to increase by 1%, we would expect a decrease in pre-tax income of approximately $25 million per year. This pre-tax income decrease would
include an increase in interest expense, partially offset by benefits of interest rate derivatives currently in effect, leases that are based on variable interest rates and interest earning cash
balances. A decrease in interest rates would result in an increase in pre-tax income. This pre-tax income increase would include a decrease in interest expense, partially offset by a decrease in the
interest revenue and lease revenue. This sensitivity analysis is limited by several factors, and should not be viewed as a forecast.
The
following tables present the average notional amounts and weighted average interest rates which are contracted for the specified year for our derivative financial instruments that
are sensitive to changes in interest rates, including our interest rate caps and swaps, as of December 31, 2017. Notional amounts are used to calculate the contractual payments to be exchanged
under the contract. Under our interest rate caps, we will receive the excess, if any, of LIBOR, reset monthly or quarterly on an actual/360 adjusted basis, over the strike rate of the relevant cap.
For our interest rate swaps, pay rates are based on the fixed rate which we are contracted to pay to our swap counterparty.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Fair value
|
|
|
|
(U.S. Dollars in millions)
|
|
Interest rate caps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average notional amounts
|
|
$
|
2,715.4
|
|
$
|
2,129.1
|
|
$
|
1,826.5
|
|
$
|
1,300.5
|
|
$
|
763.3
|
|
$
|
7.1
|
|
$
|
25.0
|
|
|
Weighted average strike rate
|
|
2.3%
|
|
2.2%
|
|
2.2%
|
|
2.3%
|
|
2.2%
|
|
3.3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Fair value
|
|
|
|
(U.S. Dollars in millions)
|
|
Interest rate swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average notional amounts
|
|
$
|
1,873.0
|
|
$
|
1,884.8
|
|
$
|
1,712.8
|
|
$
|
926.7
|
|
$
|
208.3
|
|
$
|
|
|
$
|
23.9
|
|
|
Weighted average pay rate
|
|
1.8%
|
|
1.8%
|
|
1.8%
|
|
1.9%
|
|
1.9%
|
|
%
|
|
|
|
|
The
variable benchmark interest rates associated with these instruments ranged from one- to three-month U.S. dollar LIBOR.
Our
Board of Directors is responsible for reviewing our overall interest rate management policies. Our counterparty risk is monitored on an ongoing basis, but is mitigated by the fact
that the majority of our interest rate derivative counterparties are required to collateralize in the event of their downgrade by the rating agencies below a certain level.
100
Table of Contents
Foreign currency risk and foreign operations
Our functional currency is U.S. dollars. Foreign exchange risk arises from our and our lessees' operations in multiple jurisdictions. All of our
aircraft purchase agreements are negotiated in U.S. dollars, we currently receive substantially all of our revenue in U.S. dollars and we pay our expenses primarily in U.S. dollars. We currently have
a limited number of leases denominated in foreign currencies, maintain part of our cash in foreign currencies, pay taxes in foreign currencies, and incur some of our expenses in foreign currencies,
primarily the euro. A decrease in the U.S. dollar in relation to foreign currencies increases our lease revenue received from foreign currency denominated leases and our expenses paid in foreign
currencies. An increase in the U.S. dollar in relation to foreign currencies decreases our lease revenue received from foreign currency denominated leases and our expenses paid in foreign currencies.
Because we currently receive most of our revenues in U.S. dollars and pay most of our expenses in U.S. dollars, a change in foreign exchange rates would not have a material impact on our results of
operations or cash flows. We do not have any restrictions or repatriation issues associated with our foreign cash accounts.
Inflation
Inflation generally affects our lease revenue and costs, including selling, general and administrative expenses and other expenses. We do not
believe that our financial results have been, or will be in the near future, materially and adversely affected by inflation.
Item 12. Description of Securities Other than Equity Securities
Not applicable.
AerCap Holdings N.V. and Subsidiaries
Consolidated Income Statements
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
Note
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
|
|
(U.S. Dollars in thousands,
except share and per share data)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
20, 23
|
|
$
|
4,713,802
|
|
|
$
|
4,867,623
|
|
|
$
|
4,991,551
|
|
|
Net gain on sale of assets
|
|
|
|
229,093
|
|
|
138,522
|
|
|
183,328
|
|
|
Other income
|
|
22
|
|
94,598
|
|
|
145,986
|
|
|
112,676
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
|
|
5,037,493
|
|
|
5,152,131
|
|
|
5,287,555
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
5, 9
|
|
1,727,296
|
|
|
1,791,336
|
|
|
1,843,003
|
|
|
Asset impairment
|
|
24
|
|
61,286
|
|
|
81,607
|
|
|
16,335
|
|
|
Interest expense
|
|
15
|
|
1,112,391
|
|
|
1,091,861
|
|
|
1,099,884
|
|
|
Leasing expenses
|
|
|
|
537,752
|
|
|
582,530
|
|
|
522,413
|
|
|
Transaction, integration and restructuring related expenses (a)
|
|
25
|
|
14,605
|
|
|
53,389
|
|
|
58,913
|
|
|
Selling, general and administrative expenses
|
|
18, 19, 21
|
|
348,291
|
|
|
351,012
|
|
|
381,308
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
|
|
3,801,621
|
|
|
3,951,735
|
|
|
3,921,856
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes and income of investments accounted for under the equity method
|
|
|
|
1,235,872
|
|
|
1,200,396
|
|
|
1,365,699
|
|
|
Provision for income taxes
|
|
16
|
|
(164,718
|
)
|
|
(173,496
|
)
|
|
(189,805
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
|
|
9,199
|
|
|
12,616
|
|
|
1,278
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
1,080,353
|
|
|
$
|
1,039,516
|
|
|
$
|
1,177,172
|
|
|
Net (income) loss attributable to non-controlling interest
|
|
|
|
(4,202
|
)
|
|
7,114
|
|
|
1,558
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to AerCap Holdings N.V.
|
|
|
|
$
|
1,076,151
|
|
|
$
|
1,046,630
|
|
|
$
|
1,178,730
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
26
|
|
$
|
6.68
|
|
|
$
|
5.64
|
|
|
$
|
5.78
|
|
|
Diluted earnings per share
|
|
26
|
|
$
|
6.43
|
|
|
$
|
5.52
|
|
|
$
|
5.72
|
|
|
Weighted average shares outstandingbasic
|
|
|
|
161,059,552
|
|
|
185,514,370
|
|
|
203,850,828
|
|
|
Weighted average shares outstandingdiluted
|
|
|
|
167,287,508
|
|
|
189,682,036
|
|
|
206,224,135
|
|
|
-
(a)
-
Includes
$9.6 million of transaction and integration expenses related to the ILFC Transaction for the year ended December 31, 2015.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Comprehensive Income
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
(U.S. Dollars in thousands)
|
|
Net income
|
|
$
|
1,080,353
|
|
|
$
|
1,039,516
|
|
|
$
|
1,177,172
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of derivatives (Note 12), net of tax of $(2,131), $(856) and $(47), respectively
|
|
14,918
|
|
|
5,990
|
|
|
338
|
|
|
Actuarial gain (loss) on pension obligations (Note 19), net of tax of $(257), $200 and $(4), respectively
|
|
1,125
|
|
|
(1,452
|
)
|
|
250
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
16,043
|
|
|
4,538
|
|
|
588
|
|
|
Comprehensive income
|
|
1,096,396
|
|
|
1,044,054
|
|
|
1,177,760
|
|
|
Comprehensive (income) loss attributable to non-controlling interest
|
|
(4,202
|
)
|
|
7,114
|
|
|
1,558
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to AerCap Holdings N.V.
|
|
$
|
1,092,194
|
|
|
$
|
1,051,168
|
|
|
$
|
1,179,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-6
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
(U.S. Dollars in thousands)
|
|
Net income
|
|
$
|
1,080,353
|
|
|
$
|
1,039,516
|
|
|
$
|
1,177,172
|
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
1,727,296
|
|
|
1,791,336
|
|
|
1,843,003
|
|
|
Asset impairment
|
|
61,286
|
|
|
81,607
|
|
|
16,335
|
|
|
Amortization of debt issuance costs and debt discount
|
|
65,420
|
|
|
55,768
|
|
|
45,582
|
|
|
Amortization of lease premium intangibles
|
|
13,632
|
|
|
19,836
|
|
|
23,042
|
|
|
Amortization of fair value adjustments on debt
|
|
(194,728
|
)
|
|
(335,998
|
)
|
|
(442,972
|
)
|
|
Accretion of fair value adjustments on deposits and maintenance liabilities
|
|
31,360
|
|
|
55,210
|
|
|
76,246
|
|
|
Maintenance rights write-off (a)
|
|
539,772
|
|
|
652,111
|
|
|
628,643
|
|
|
Maintenance liability release to income
|
|
(302,408
|
)
|
|
(421,332
|
)
|
|
(243,809
|
)
|
|
Net gain on sale of assets
|
|
(229,093
|
)
|
|
(138,522
|
)
|
|
(183,328
|
)
|
|
Deferred income taxes
|
|
157,021
|
|
|
161,340
|
|
|
110,353
|
|
|
Restructuring related expenses
|
|
5,097
|
|
|
33,588
|
|
|
49,311
|
|
|
Other
|
|
120,489
|
|
|
121,700
|
|
|
90,074
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
(10,567
|
)
|
|
40,065
|
|
|
48,468
|
|
|
Other assets
|
|
55,309
|
|
|
257,190
|
|
|
88,418
|
|
|
Accounts payable, accrued expenses and other liabilities
|
|
19,978
|
|
|
(32,183
|
)
|
|
33,502
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
3,140,217
|
|
|
3,381,232
|
|
|
3,360,040
|
|
|
Purchase of flight equipment
|
|
(3,956,671
|
)
|
|
(2,892,731
|
)
|
|
(2,772,110
|
)
|
|
Proceeds from sale or disposal of assets
|
|
1,779,321
|
|
|
2,366,242
|
|
|
1,568,235
|
|
|
Prepayments on flight equipment
|
|
(1,268,585
|
)
|
|
(947,419
|
)
|
|
(791,546
|
)
|
|
Collections of finance and sales-type leases
|
|
91,918
|
|
|
74,207
|
|
|
54,975
|
|
|
Movement in restricted cash
|
|
(35,276
|
)
|
|
90,267
|
|
|
297,941
|
|
|
Other
|
|
(38,102
|
)
|
|
(21,678
|
)
|
|
(73,400
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
(3,427,395
|
)
|
|
(1,331,112
|
)
|
|
(1,715,905
|
)
|
|
Issuance of debt
|
|
5,596,402
|
|
|
3,642,166
|
|
|
3,913,840
|
|
|
Repayment of debt
|
|
(4,695,453
|
)
|
|
(5,213,724
|
)
|
|
(4,043,743
|
)
|
|
Debt issuance costs paid
|
|
(81,396
|
)
|
|
(34,687
|
)
|
|
(49,417
|
)
|
|
Maintenance payments received
|
|
756,314
|
|
|
794,711
|
|
|
776,488
|
|
|
Maintenance payments returned
|
|
(523,403
|
)
|
|
(505,407
|
)
|
|
(558,477
|
)
|
|
Security deposits received
|
|
187,378
|
|
|
201,970
|
|
|
171,408
|
|
|
Security deposits returned
|
|
(188,362
|
)
|
|
(270,575
|
)
|
|
(144,445
|
)
|
|
Dividend paid to non-controlling interest holders
|
|
(266
|
)
|
|
(10,501
|
)
|
|
|
|
|
Repurchase of shares and tax withholdings on share-based compensation
|
|
(1,138,782
|
)
|
|
(1,021,119
|
)
|
|
(793,945
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
(87,568
|
)
|
|
(2,417,166
|
)
|
|
(728,291
|
)
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(374,746
|
)
|
|
(367,046
|
)
|
|
915,844
|
|
|
Effect of exchange rate changes
|
|
(1,032
|
)
|
|
(605
|
)
|
|
(3,115
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
2,035,447
|
|
|
2,403,098
|
|
|
1,490,369
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
1,659,669
|
|
|
$
|
2,035,447
|
|
|
$
|
2,403,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-7
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
(U.S. Dollars in thousands)
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Interest paid, net of amounts capitalized
|
|
$
|
1,231,539
|
|
|
$
|
1,339,095
|
|
|
$
|
1,409,860
|
|
|
Income taxes paid, net
|
|
18,957
|
|
|
61,834
|
|
|
20,178
|
|
|
-
(a)
-
Maintenance
rights write-off consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
EOL and MR contract maintenance rights expense
|
|
$
|
355,845
|
|
$
|
381,637
|
|
$
|
348,366
|
|
|
EOL contract maintenance rights write-off due to cash receipt
|
|
106,433
|
|
96,503
|
|
118,438
|
|
|
MR contract maintenance rights write-off due to maintenance liability release
|
|
77,494
|
|
173,971
|
|
161,839
|
|
|
|
|
|
|
|
|
|
|
|
Maintenance rights write-off
|
|
$
|
539,772
|
|
$
|
652,111
|
|
$
|
628,643
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-8
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
For the Years Ended December 31, 2017, 2016 and 2015
Non-Cash Investing and Financing Activities
Year
ended December 31, 2017:
Flight
equipment held for operating leases in the amount of $332.2 million was reclassified to net investment in finance and sales-type leases.
Flight
equipment held for operating leases in the amount of $20.6 million was reclassified to inventory, which is included in other assets.
Accrued
maintenance liability in the amount of $275.4 million was settled with buyers upon sale or disposal of assets.
Year
ended December 31, 2016:
Flight
equipment held for operating leases in the amount of $442.2 million was reclassified to net investment in finance and sales-type leases.
Flight
equipment held for operating leases in the amount of $87.8 million was reclassified to inventory, which is included in other assets.
Net
investment in finance and sales-type leases in the amount of $18.4 million was reclassified to flight equipment held for operating leases.
Accrued
maintenance liability in the amount of $341.2 million was settled with buyers upon sale or disposal of assets.
Year
ended December 31, 2015:
Flight
equipment held for operating leases in the amount of $152.2 million was reclassified to net investment in finance and sales-type leases.
Flight
equipment held for operating leases in the amount of $49.6 million was reclassified to inventory, which is included in other assets.
Accrued
maintenance liability in the amount of $49.1 million was settled with buyers upon sale or disposal of assets.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-9
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Equity
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
ordinary
shares issued
|
|
Ordinary
share
capital
|
|
Additional
paid-in
capital
|
|
Treasury
shares
|
|
Accumulated
other
comprehensive
loss
|
|
Accumulated
retained
earnings
|
|
AerCap
Holdings N.V.
shareholders'
equity
|
|
|
|
(U.S. Dollars in thousands, except share data)
|
|
Balance as of December 31, 2014
|
|
212,318,291
|
|
|
$
|
2,559
|
|
|
$
|
5,557,627
|
|
|
$
|
|
|
|
$
|
(6,895
|
)
|
|
$
|
2,310,486
|
|
|
$
|
7,863,777
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
(761,228
|
)
|
|
|
|
|
|
|
|
(761,228
|
)
|
|
Share cancellation
|
|
(9,698,588
|
)
|
|
(111
|
)
|
|
(474,467
|
)
|
|
474,578
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
100,162
|
|
|
|
|
|
|
|
|
|
|
|
100,162
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
791,504
|
|
|
9
|
|
|
(156,329
|
)
|
|
140,338
|
|
|
|
|
|
(17,084
|
)
|
|
(33,066
|
)
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
588
|
|
|
1,178,730
|
|
|
1,179,318
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
203,411,207
|
|
|
$
|
2,457
|
|
|
$
|
5,026,993
|
|
|
$
|
(146,312
|
)
|
|
$
|
(6,307
|
)
|
|
$
|
3,472,132
|
|
|
$
|
8,348,963
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
(965,982
|
)
|
|
|
|
|
|
|
|
(965,982
|
)
|
|
Share cancellation
|
|
(15,563,862
|
)
|
|
(175
|
)
|
|
(577,967
|
)
|
|
578,142
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
102,843
|
|
|
|
|
|
|
|
|
|
|
|
102,843
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
|
|
|
|
|
|
(46,850
|
)
|
|
44,060
|
|
|
|
|
|
(9,755
|
)
|
|
(12,545
|
)
|
|
Total comprehensive income (loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,538
|
|
|
1,046,630
|
|
|
1,051,168
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
187,847,345
|
|
|
$
|
2,282
|
|
|
$
|
4,505,019
|
|
|
$
|
(490,092
|
)
|
|
$
|
(1,769
|
)
|
|
$
|
4,509,007
|
|
|
$
|
8,524,447
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
|
|
|
|
(1,124,724
|
)
|
|
|
|
|
|
|
|
(1,124,724
|
)
|
|
Share cancellation
|
|
(20,000,000
|
)
|
|
(224
|
)
|
|
(860,324
|
)
|
|
860,548
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
|
|
|
|
|
107,719
|
|
|
|
|
|
|
|
|
|
|
|
107,719
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
|
|
|
|
|
|
(37,851
|
)
|
|
22,826
|
|
|
|
|
|
(4,901
|
)
|
|
(19,926
|
)
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,043
|
|
|
1,076,151
|
|
|
1,092,194
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
167,847,345
|
|
|
$
|
2,058
|
|
|
$
|
3,714,563
|
|
|
$
|
(731,442
|
)
|
|
$
|
14,274
|
|
|
$
|
5,580,257
|
|
|
$
|
8,579,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-10
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Consolidated Statements of Equity (Continued)
For the Years Ended December 31, 2017, 2016 and 2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AerCap
Holdings N.V.
shareholders'
equity
|
|
Non-controlling
interest
|
|
Total equity
|
|
|
|
(U.S. Dollars in thousands, except share data)
|
|
Balance as of December 31, 2014
|
|
$
|
7,863,777
|
|
|
$
|
78,771
|
|
|
$
|
7,942,548
|
|
|
Dividends paid
|
|
|
|
|
(367
|
)
|
|
(367
|
)
|
|
Repurchase of shares
|
|
(761,228
|
)
|
|
|
|
|
(761,228
|
)
|
|
Share cancellation
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
100,162
|
|
|
|
|
|
100,162
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
(33,066
|
)
|
|
|
|
|
(33,066
|
)
|
|
Total comprehensive income (loss)
|
|
1,179,318
|
|
|
(1,558
|
)
|
|
1,177,760
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2015
|
|
$
|
8,348,963
|
|
|
$
|
76,846
|
|
|
$
|
8,425,809
|
|
|
Dividends paid
|
|
|
|
|
(11,915
|
)
|
|
(11,915
|
)
|
|
Repurchase of shares
|
|
(965,982
|
)
|
|
|
|
|
(965,982
|
)
|
|
Share cancellation
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
102,843
|
|
|
|
|
|
102,843
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
(12,545
|
)
|
|
|
|
|
(12,545
|
)
|
|
Total comprehensive income (loss)
|
|
1,051,168
|
|
|
(7,114
|
)
|
|
1,044,054
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
$
|
8,524,447
|
|
|
$
|
57,817
|
|
|
$
|
8,582,264
|
|
|
Dividends paid
|
|
|
|
|
(2,915
|
)
|
|
(2,915
|
)
|
|
Repurchase of shares
|
|
(1,124,724
|
)
|
|
|
|
|
(1,124,724
|
)
|
|
Share cancellation
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
107,719
|
|
|
|
|
|
107,719
|
|
|
Ordinary shares issued, net of tax withholdings
|
|
(19,926
|
)
|
|
|
|
|
(19,926
|
)
|
|
Total comprehensive income
|
|
1,092,194
|
|
|
4,202
|
|
|
1,096,396
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
$
|
8,579,710
|
|
|
$
|
59,104
|
|
|
$
|
8,638,814
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-11
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements
(U.S. Dollars in thousands or as otherwise stated, except share
and per share data)
1. General
The Company
We are a global leader in aircraft leasing with total assets of $42.0 billion, primarily consisting of 980 owned aircraft as of
December 31, 2017. Our ordinary shares are listed on the New York Stock Exchange (AER). Our headquarters is located in Dublin, and we have offices in Shannon, Los Angeles, Singapore, Amsterdam,
Fort Lauderdale, Shanghai and Abu Dhabi. We also have representative offices at the world's largest aircraft manufacturers, Boeing in Seattle and Airbus in Toulouse.
The
Consolidated Financial Statements presented herein include the accounts of AerCap Holdings N.V. and its subsidiaries. AerCap Holdings N.V. is a public limited liability
company ("
naamloze vennootschap" or "N.V.
") incorporated in the Netherlands on July 10, 2006.
2. Basis of presentation
General
Our Consolidated Financial Statements are presented in accordance with U.S. GAAP.
We
consolidate all companies in which we have direct and indirect legal or effective control and all VIEs for which we are deemed the PB and have control under ASC 810. All intercompany
balances and transactions with consolidated subsidiaries have been eliminated. The results of consolidated entities are included from the effective date of control or, in the case of VIEs, from the
date that we are or become the PB. The results of subsidiaries sold or otherwise deconsolidated are excluded from the date that we cease to control the subsidiary or, in the case of VIEs, when we
cease to be the PB.
Unconsolidated
investments where we have significant influence are reported using the equity method of accounting.
Our
Consolidated Financial Statements are stated in U.S. dollars, which is our functional currency.
Due
to rounding, numbers presented throughout this document may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
Use of estimates
The preparation of Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. The use of estimates is or could be a significant factor affecting the reported carrying values of flight equipment, intangibles, investments, trade and notes receivables,
deferred income tax assets and accruals and reserves. Actual results may differ from our estimates under different conditions, sometimes materially.
3. Summary of significant accounting policies
Cash and cash equivalents
Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.
F-12
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Restricted cash
Restricted cash includes cash held by banks that is subject to withdrawal restrictions. Such amounts are typically restricted under secured debt
agreements and can be used only to maintain the aircraft securing the debt and to provide debt service payments of principal and interest.
Trade receivables
Trade receivables represent unpaid, current lessee obligations under existing lease contracts. An allowance for credit losses on trade
receivables is established when the risk of non-recovery is probable. The risk of non-recovery is primarily based on the extent to which amounts outstanding exceed the value of security held, together
with an assessment of the financial strength and condition of a debtor and the economic conditions persisting in the debtor's operating environment. The allowance for credit losses is classified as
leasing expenses in our Consolidated Income Statements.
Flight equipment held for operating leases, net
Flight equipment held for operating leases is stated at cost less accumulated depreciation and impairment. Flight equipment is depreciated to
its estimated residual value on a straight-line basis over the useful life of the aircraft, which is generally 25 years from the date of manufacture, or a different period depending on the
disposition strategy. The costs of improvements to flight equipment are normally recorded as leasing expenses unless the improvement increases the long-term value or extends the useful life of the
flight equipment. The capitalized improvement cost is depreciated over the estimated remaining useful life of the aircraft. The residual value of our flight equipment is generally 15% of estimated
industry standard price, except where more relevant information indicates a different residual value is more appropriate.
We
periodically review the estimated useful lives and residual values of our flight equipment based on our knowledge of the industry, external factors, such as current market conditions,
and changes in our disposition strategies, to determine if they are appropriate, and record adjustments to depreciation rates prospectively on an aircraft by aircraft basis, as necessary.
On
a quarterly basis, we perform recoverability assessments of our long-lived assets when events or changes in circumstances indicate that the carrying value of such assets may not be
recoverable. On an annual basis, we perform impairment assessments for all of our aircraft held for operating leases that are five years of age or older. The review of recoverability includes an
assessment of the estimated future cash flows associated with the use of an asset and its eventual disposal. The assets are grouped at the lowest level for which identifiable cash flows are largely
independent of other groups of assets, which includes the individual aircraft and the lease-related assets and liabilities of that aircraft (the "Asset Group"). If the sum of the expected undiscounted
future cash flows is less than the aggregate net book value of the Asset Group, an impairment loss is recognized. The loss is measured as the excess of the carrying amount of the impaired aircraft
over its estimated fair value.
Fair
value reflects the present value of the future cash flows expected to be generated from the aircraft, including its expected residual value, discounted at a rate commensurate with
the associated risk. Future cash flows are assumed to occur under the current market conditions and assume adequate time for a sale between a willing buyer and a willing seller. Expected future lease
rates are based on all relevant information available, including current contracted rates for similar aircraft and industry trends.
F-13
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Capitalization of interest
We capitalize interest on prepayments of forward order flight equipment and add such amount to prepayments on flight equipment. The amount of
interest capitalized is the actual interest costs incurred on the debt specific to the prepayments, if any, or the amount of interest costs which could have been avoided in the absence of such
prepayments.
Net investment in finance and sales-type leases
If a lease meets specific criteria under U.S. GAAP, we recognize the lease in net investment in finance and sales-type leases in our
Consolidated Balance Sheets and de-recognize the aircraft from flight equipment held for operating leases. For sales-type leases, we recognize the difference between the aircraft carrying value and
the amount recognized in net investment in finance and sales-type leases in net gain on sale of assets in our Consolidated Income Statements. The amounts recognized for finance and sales-type leases
consist of lease receivables and the estimated unguaranteed residual value of the flight equipment on the lease termination date, less the unearned income. Expected unguaranteed residual values are
based on our assessment of the values of the flight equipment at expiration of the lease. The unearned income is recognized as lease revenue in our Consolidated Income Statements over the lease term,
in a manner that produces a constant rate of return on the lease.
Definite-lived intangible assets
We recognize intangible assets acquired in a business combination at fair value on the date of acquisition. The rate of amortization of
definite-lived intangible assets is calculated based on the period over which we expect to derive economic benefits from such assets.
Maintenance rights intangible and lease premium, net
Maintenance rights intangible assets are recognized when we acquire aircraft subject to existing leases. These intangible assets represent the
contractual right to receive the aircraft in a specified maintenance condition at the end of the lease under EOL contracts or our right to receive an aircraft in better maintenance condition due to
our obligation to contribute towards the cost of the maintenance events performed by the lessee either through reimbursement of maintenance deposit rents held under MR contracts, or through a lessor
contribution to the lessee.
For
EOL contracts, upon lease termination, we recognize receipts of EOL cash compensation as lease revenue in our Consolidated Income Statements to the extent those receipts exceed the
EOL contract maintenance rights intangible asset and we recognize leasing expenses in our Consolidated Income Statements when the EOL contract maintenance rights intangible asset exceeds the EOL cash
receipts. For MR contracts, we recognize maintenance rights expense at the time the lessee submits a reimbursement claim and provides the required documentation related to the cost of a qualifying
maintenance event that relates to pre-acquisition usage.
Lease
premium assets represent the value of an acquired lease where the contractual rental payments are above the market rate. We amortize the lease premium assets on a straight-line
basis over the term of the lease as a reduction of lease revenue in our Consolidated Income Statements.
F-14
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Other definite-lived intangible assets, net
Other definite-lived intangible assets primarily consist of customer relationships recorded at fair value on the ILFC Transaction closing date.
These intangible assets are amortized over the period which we expect to derive economic benefits from such assets. The amortization expense is recorded in depreciation and amortization in our
Consolidated Income Statements. We evaluate all definite-lived intangible assets for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be
recoverable.
Other assets
Other assets consist of inventory, debt issuance costs, lease incentives, investments, notes receivables, derivative financial instruments,
other tangible fixed assets, and straight-line rents, prepaid expenses and other receivables.
Inventory
Inventory consists primarily of engine and airframe components and piece parts. We value our inventory at the lower of cost and net realizable
value. Generally, inventory that is held for more than four years is considered excess inventory and its carrying value is reduced to zero.
Lease incentives
We capitalize amounts paid or value provided to lessees as lease incentives. We amortize lease incentives on a straight-line basis over the term
of the related lease as a reduction in lease revenue in our Consolidated Income Statements.
Investments
Unconsolidated investments where we have significant influence are reported using the equity method of accounting. Under the equity method of
accounting, we recognize our share of earnings and losses of such investments in equity in net earnings (losses) of investments accounted for under the equity method.
Notes receivables
Notes receivables represent amounts advanced in the normal course of our operations and also arise from the restructuring and deferral of trade
receivables from lessees experiencing financial difficulties. An allowance for credit losses on notes receivables is established when the risk of non-recovery is probable. The assessment of the risk
of non-recovery where lessees are experiencing financial difficulties is primarily based on the extent to which amounts outstanding exceed the value of security held, together with an assessment of
the financial strength and condition of the debtor and the economic conditions persisting in the debtor's operating environment.
Derivative financial instruments
We use derivative financial instruments to manage our exposure to interest rate risks. We recognize derivatives in our Consolidated Balance
Sheets at fair value.
F-15
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
When
cash flow hedge accounting treatment is applied, the changes in fair values related to the effective portion of the derivatives are recorded in AOCI, and the ineffective portion is
recognized immediately in interest expense. Amounts reflected in AOCI related to the effective portion are reclassified into interest expense in the same period or periods during which the hedged
transaction affects interest expense.
We
discontinue hedge accounting prospectively when
(i)
we determine that the derivative is no longer effective in offsetting
changes in the fair value or cash flows of the hedged item;
(ii)
the derivative expires or is sold, terminated, or exercised; or
(iii)
management
determines that designating the derivative as a hedging instrument is no longer appropriate. In all situations in which hedge
accounting is discontinued and the derivative remains outstanding, we recognize the changes in the fair value in current-period earnings. The remaining balance in AOCI at the time we discontinue hedge
accounting is not recognized in our Consolidated Income Statements unless it is probable that the forecasted transaction will not occur. Such amounts are recognized in interest expense when the hedged
transaction affects interest expense.
When
cash flow hedge accounting treatment is not applied, the changes in fair values related to interest rate related derivatives between periods are recognized in interest expense in
our Consolidated Income Statements.
Net
cash received or paid under derivative contracts in any reporting period is classified as operating cash flows in our Consolidated Statements of Cash Flows.
Other tangible fixed assets
Other tangible fixed assets consist primarily of leasehold improvements, computer equipment and office furniture, and are valued at acquisition
cost and depreciated at various rates over the asset's estimated useful life on a straight-line basis. Depreciation expense on other tangible fixed assets is recorded in depreciation and amortization
in our Consolidated Income Statements.
Fair value measurements
Fair value is defined as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. We measure the fair value of our derivatives on a recurring basis and measure the fair value of flight equipment and definite-lived intangible assets on a
non-recurring basis. See Note 30
Fair value measurements
.
Income taxes
We recognize an uncertain tax benefit only to the extent that it is more likely than not that the tax position will be sustained on examination
by the taxing authorities, based on the technical merits of the position.
F-16
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Deferred income tax assets and liabilities
We report deferred income taxes resulting from the temporary differences between the book values and the tax values of assets and liabilities
using the liability method. The differences are calculated at nominal value using the enacted tax rate applicable at the time the temporary difference is expected to reverse. Deferred income tax
assets attributable to unutilized losses carried forward or other timing differences are reduced by a valuation allowance if it is more likely than not that such losses will not be utilized to offset
future taxable income.
Guarantees
We have potential obligations under guarantee contracts that we have entered into with third parties. See
Note 29
Commitments and contingencies
. We initially recognize guarantees at fair value. Subsequently, if it becomes probable that we
will be required to perform under a guarantee, we accrue a liability based on an estimate of the loss we will incur to perform under the guarantee. The loss estimate is generally measured as the
amount by which the contractual guaranteed value exceeds the fair market value or future lease cash flows of the underlying aircraft.
Accrued maintenance liability
Under our aircraft leases, the lessee is responsible for maintenance and repairs and other operating expenses related to the flight equipment
during the term of the lease. In certain instances, such as when an aircraft is not subject to a lease, we may incur maintenance and repair expenses for our aircraft. Maintenance and repair expenses
are recorded in leasing expenses in our Consolidated Income Statements, to the extent such expenses are incurred by us.
We
may be obligated to make additional payments to the lessee for maintenance-related expenses, primarily related to usage of major life-limited components existing at the inception of
the lease ("lessor maintenance contributions"). For all lease contracts, we expense planned major maintenance activities, such as lessor maintenance contributions, when incurred. The expense is
recorded in leasing expenses in our Consolidated Income Statements. In the case we have established an accrual as an assumed liability for such payment in connection with the purchase of an aircraft
with a lease attached, such payments are charged against the existing accrual.
For
all lease contracts acquired as part of the ILFC Transaction, we determined the fair value of our maintenance liability, including lessor maintenance contributions, using the present
value of the expected cash outflows. The discounted amounts are accreted in subsequent periods to their respective nominal values up until the expected maintenance event dates using the effective
interest method. The accretion amounts are recorded as increases to interest expense in our Consolidated Income Statements.
Debt and deferred debt issuance costs
Long-term debt is carried at the principal amount borrowed, including unamortized discounts and premiums, fair value adjustments and debt
issuance costs, where applicable. The fair value adjustments reflect the application of the acquisition method of accounting to the debt assumed as part of the ILFC Transaction. We amortize the amount
of discounts or premiums and fair value adjustments over the period the debt is outstanding using the effective interest method. The costs we incur for issuing debt are capitalized and amortized as an
increase to interest expense over the life of the debt using the effective interest method.
Debt
issuance costs related to our line-of-credit arrangements are presented within other assets.
F-17
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Lessee security deposits
For all lessee deposits assumed as part of the ILFC Transaction, we discounted the lessee security deposit amounts to their respective present
values. We accrete the discounted security deposit amounts to their respective nominal values over the period we expect to refund the security deposits to each lessee, using the effective interest
method, recognizing an increase in interest expense.
Revenue recognition
We lease flight equipment principally under operating leases and recognize rental income on a straight-line basis over the life of the lease. At
lease inception, we review all necessary criteria to determine proper lease classification. We account for lease agreements that include uneven rental payments on a straight-line basis. The difference
between rental revenue recognized and cash received is included in our Consolidated Balance Sheets in other assets, or in the event it is a liability, in accounts payable, accrued expenses and other
liabilities. In certain cases, leases provide for rentals contingent on usage. The usage may be calculated based on hourly usage or on the number of cycles operated, depending on the lease contract.
Revenue contingent on usage is recognized at the time the lessee reports the usage to us.
Lease
agreements for which base rent is based on floating interest rates are included in minimum lease payments based on the floating interest rate that existed at the inception of the
lease; and any increases or decreases in lease payments that result from subsequent changes in the floating interest rate are considered contingent rentals and are recorded as increases or decreases
in lease revenue in the period of the interest rate change.
Our
lease contracts normally include default covenants, which generally obligate the lessee to pay us damages to put us in the position we would have been in had the lessee performed
under the lease in full. There are no additional payments required which would increase the minimum lease payments. We cease revenue recognition on a lease contract when the collectability of such
rentals is no longer reasonably assured. For past-due rentals that exceed related security deposits held, which have been recognized as revenue, we establish provisions on the basis of management's
assessment of collectability. Such provisions are recorded in leasing expenses in our Consolidated Income Statements.
Revenue
from net investment in finance and sales-type leases is recognized using the interest method to produce a constant yield over the life of the lease and is included in lease
revenue in our Consolidated Income Statements.
Most
of our lease contracts require rental payments in advance. Rental payments received but unearned under these lease agreements are recorded as deferred revenue in our Consolidated
Balance Sheets.
Under
our aircraft leases, the lessee is responsible for maintenance, repairs and other operating expenses during the term of the lease. Under the provisions of many of our leases, the
lessee is required to make payments of supplemental maintenance rents which are calculated with reference to the utilization of the airframe, engines and other major life-limited components during the
lease. We record as lease revenue all supplemental maintenance rent receipts not expected to be reimbursed to lessees. We estimate the total amount of maintenance reimbursements for the entire lease
and only record revenue after we have received sufficient maintenance rents under a particular lease to cover the total amount of estimated maintenance reimbursements during the remaining lease term.
F-18
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
In
most lease contracts not requiring the payment of supplemental maintenance rents, and to the extent that the aircraft is redelivered in a different condition than at acceptance, we
generally receive EOL cash compensation for the difference at redelivery. Upon lease termination, we recognize receipts of EOL cash compensation as lease revenue in our Consolidated Income Statements
to the extent those receipts exceed the EOL contract maintenance rights intangible asset and we recognize leasing expenses in our Consolidated Income Statements when the EOL contract maintenance
rights intangible asset exceeds the EOL cash receipts.
The
accrued maintenance liability existing at lease termination is recognized as lease revenue net of the MR contract maintenance rights intangible asset. When flight equipment is sold,
the portion of the accrued maintenance liability not specifically assigned to the buyer is released net of any maintenance rights intangible asset balance and is included in net gain on sale of assets
in our Consolidated Income Statements.
Net
gain or loss on sale of assets is recognized when we sell aircraft and engines. The sale is recognized when the relevant asset is delivered, the risk of loss has transferred to the
buyer, and we no longer have significant ownership risk in the asset sold.
Other
income consists of interest revenue, management fee revenue, lease termination penalties, inventory part sales, net gain on sale of equity investments accounted for under the
equity method, insurance proceeds, and other miscellaneous activities. Interest revenue from secured loans, notes receivables and other interest bearing instruments is recognized using the effective
yield method as interest accrues under the associated contracts. Management fee revenue is recognized as income as it accrues over the life of the contract. Income from the receipt of lease
termination penalties is recorded at the time cash is received or when the lease is terminated, if revenue recognition criteria are met.
Pension
We operate defined benefit pension plans for a small number of our employees. We recognize net periodic pension costs associated with these
plans in selling, general and administrative expenses and recognize the unfunded status of the plan, if any, in accounts payable, accrued expenses and other liabilities. The change in fair value of
the funded pension liability that is not related to the net periodic pension cost is recorded in AOCI. The projection of benefit obligation and fair value of plan assets require the use of assumptions
and estimates, including discount rates. Actual results could differ from those estimates. Furthermore, we operate defined contribution plans for the employees who do not fall under the defined
benefit pension plans. We recognize an expense for contributions to the defined contribution plans in selling, general and administrative expenses in the period the contributions are made.
Share-based compensation
Employees may receive AerCap share-based awards, consisting of restricted stock units or restricted stock. Share-based compensation expense is
determined by reference to the fair value of the restricted stock units or restricted stock on the grant date and is recognized on a straight-line basis over the requisite service period. Share-based
compensation expense is classified in selling, general and administrative expenses in our Consolidated Income Statements.
F-19
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Foreign currency
Foreign currency transactions are translated into U.S. dollars at the exchange rate prevailing at the time of the transaction. Receivables or
payables denominated in foreign currencies are remeasured into U.S. dollars at the exchange rate at the balance sheet date. All resulting exchange gains and losses are recorded in selling, general and
administrative expenses in our Consolidated Income Statements.
Variable interest entities
We consolidate VIEs in which we have determined that we are the PB. We use judgment when determining
(i)
whether an entity is a VIE;
(ii)
who are the variable interest holders;
(iii)
the elements and degree of control that each variable interest holder has; and
(iv)
ultimately which party is the PB. When determining
which party is the PB, we perform an analysis which considers
(i)
the design of the VIE;
(ii)
the capital structure of the VIE;
(iii)
the contractual relationships between the variable interest holders;
(iv)
the nature
of the entities' operations; and
(v)
the purposes and interests of all parties involved, including related parties. While we consider these
factors, our conclusion about whether to consolidate ultimately depends on the breadth of our decision-making ability and our ability to influence activities that significantly affect the economic
performance of the VIE. We continually re-evaluate whether we are the PB for VIEs in which we hold a variable interest.
Earnings per share
Basic EPS is computed by dividing income available to ordinary shareholders by the weighted average number of ordinary shares outstanding during
the period. For the purposes of calculating diluted EPS, the denominator includes both the weighted average number of ordinary shares outstanding during the period and the weighted average number of
potentially dilutive ordinary shares, such as restricted stock units, restricted stock and stock options.
Reportable segments
We manage our business and analyze and report our results of operations on the basis of one business segment: leasing, financing, sales and
management of commercial aircraft and engines.
Recent accounting standards adopted during the year ended December 31, 2017:
Stock compensation
In March 2016, the FASB issued an accounting standard that requires entities to record all tax effects related to share-based awards in the
income statement when the awards vest or are settled. The accounting standard also requires excess tax benefits to be recorded when they arise, subject to normal valuation allowance considerations.
Excess tax benefits are to be reported as operating activities on the statement of cash flows.
We
adopted the standard on its required effective date of January 1, 2017 and it did not have a material effect on our Consolidated Financial Statements.
F-20
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Future application of accounting standards:
Revenue from contracts with customers
In May 2014, the FASB issued an accounting standard that provides a single comprehensive model for entities to use in accounting for revenue
arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. This guidance does not apply to lease contracts with customers.
The standard will require an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be
entitled in exchange for those goods or services. This update creates a five-step model that requires entities to exercise judgment when considering the terms of the contract including
(i)
identifying the contract with the customer;
(ii)
identifying the separate performance
obligations in the contract;
(iii)
determining the transaction price;
(iv)
allocating the
transaction price to the separate performance obligations; and
(v)
recognizing revenue when each performance obligation is satisfied.
This
standard is effective for fiscal years beginning after December 15, 2017 and may be adopted using either a full retrospective or modified retrospective method. We will adopt
the standard on its required effective date of January 1, 2018, using the modified retrospective method. The impact of this standard will not be material to our Consolidated Financial
Statements and related disclosures.
Lease accounting
In February 2016, the FASB issued an accounting standard that requires lessees to recognize lease-related assets and liabilities on the balance
sheet, other than leases that meet the definition of a short-term lease. In certain circumstances, the lessee is required to remeasure the lease payments. Qualitative and quantitative disclosures,
including significant judgments made by management, will be required to provide insight into the extent of revenue and expense recognized and expected to be recognized from existing contracts. Under
the new standard, lessor accounting remains similar to the current model. The new standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within
those fiscal years. Early adoption is permitted. The new standard must be adopted using the modified retrospective transition approach. We will adopt the standard on its required effective date of
January 1, 2019. We do not expect the impact of this standard to be material to our Consolidated Balance Sheets and Consolidated Income Statements.
Allowance for credit losses
In June 2016, the FASB issued an accounting standard that requires entities to estimate lifetime expected credit losses for most financial
assets measured at amortized cost and certain other instruments, including trade and other receivables, net investments in leases and off-balance sheet credit exposures. The standard also requires
additional disclosure, including how the entity develops its allowance for credit losses for financial assets measured at amortized cost and disaggregated information on the credit quality of net
investments in leases measured at amortized cost by year of the asset's origination for up to five annual periods. The standard is effective for fiscal years beginning after December 15, 2019,
including interim periods within those fiscal years. Early adoption will be permitted in any interim or annual period beginning after December 15, 2018. The new standard must be adopted using
the modified retrospective transition approach. We will adopt the standard on its required effective date of January 1, 2020. We are evaluating the effect the adoption of the standard will have
on our Consolidated Balance Sheets and Consolidated Income Statements.
F-21
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
3. Summary of significant accounting policies (Continued)
Statement of cash flows
In August 2016, the FASB issued an accounting standard that is intended to reduce diversity in practice in how certain transactions are
classified in the statement of cash flows. The standard includes clarifications that
(i)
cash payments for debt prepayment or extinguishment
costs must be classified as cash outflows for financing activities;
(ii)
cash proceeds from the settlement of insurance claims should be
classified based on the nature of the loss;
(iii)
an entity is required to make an accounting policy election to classify distributions received
from equity method investees under either the cumulative-earnings approach or the nature of distribution approach; and
(iv)
in the absence of
specific guidance, an entity should classify each separately identifiable cash source and use on the basis of the underlying cash flows. The standard is effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The new standard must be adopted using the retrospective transition method. We will adopt the standard on its required
effective date of January 1, 2018. The impact of this standard will not be material to our Consolidated Statements of Cash Flows.
Presentation of restricted cash in the statement of cash flows
In November 2016, the FASB issued an accounting standard that clarifies how entities should present restricted cash and restricted cash
equivalents in the statement of cash flows. The standard requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement
of cash flows. The standard also requires a reconciliation of the totals in the statement of cash flows to the related captions in the balance sheet. The standard is effective for fiscal years
beginning after December 15, 2017, including interim periods within those fiscal years. The new standard must be adopted retrospectively. We will adopt the standard on its required effective
date of January 1, 2018. The impact of this standard will not be material to our Consolidated Statements of Cash Flows.
4. Restricted cash
Our restricted cash balance was $364.5 million and $329.2 million as of December 31, 2017 and 2016, respectively, and was primarily related to our ECA financings,
our Ex-Im financings, our AerFunding revolving credit facility and other debt. See Note 15
Debt
.
F-22
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
5. Flight equipment held for operating leases, net
Movements in flight equipment held for operating leases during the years ended December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
Net book value at beginning of period
|
|
$
|
31,501,973
|
|
|
$
|
32,219,494
|
|
|
Additions
|
|
5,276,715
|
|
|
3,863,905
|
|
|
Depreciation
|
|
(1,690,753
|
)
|
|
(1,753,574
|
)
|
|
Impairment (Note 24)
|
|
(54,331
|
)
|
|
(78,335
|
)
|
|
AeroTurbine restructuring (Note 25)
|
|
(2,662
|
)
|
|
(15,392
|
)
|
|
Disposals and transfers (to) from held for sale
|
|
(2,281,401
|
)
|
|
(2,222,432
|
)
|
|
Transfers (to) from net investment in finance and sales-type leases/inventory
|
|
(352,714
|
)
|
|
(511,693
|
)
|
|
|
|
|
|
|
|
Net book value at end of period
|
|
$
|
32,396,827
|
|
|
$
|
31,501,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation as of December 31, 2017 and 2016, respectively
|
|
$
|
(6,067,084
|
)
|
|
$
|
(5,086,611
|
)
|
|
6. Net investment in finance and sales-type leases
Components of net investment in finance and sales-type leases as of December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2017
|
|
2016
|
|
|
Future minimum lease payments to be received
|
|
$
|
865,456
|
|
|
$
|
708,934
|
|
|
|
Estimated residual values of leased flight equipment (unguaranteed)
|
|
498,894
|
|
|
321,739
|
|
|
|
Less: Unearned income
|
|
(368,661
|
)
|
|
(274,791
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
995,689
|
|
|
$
|
755,882
|
|
|
|
Less: Allowance for credit losses
|
|
|
|
|
|
|
|
(a)
|
|
|
|
|
|
|
|
|
|
$
|
995,689
|
|
|
$
|
755,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
During
the year ended December 31, 2016, we recognized a direct write-off for credit losses on four finance leases of $11.1 million, which was recorded
in leasing expenses in our Consolidated Income Statement.
F-23
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
6. Net investment in finance and sales-type leases (Continued)
As
of December 31, 2017, future minimum lease payments to be received on finance and sales-type leases were as follows:
|
|
|
|
|
|
|
|
Future minimum
lease payments
to
be received
|
|
2018
|
|
$
|
151,644
|
|
|
2019
|
|
137,789
|
|
|
2020
|
|
117,149
|
|
|
2021
|
|
103,243
|
|
|
2022
|
|
82,958
|
|
|
Thereafter
|
|
272,673
|
|
|
|
|
|
|
|
|
$
|
865,456
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. Maintenance rights intangible and lease premium, net
Maintenance rights intangible and lease premium consisted of the following as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Maintenance rights intangible
|
|
$
|
1,464,599
|
|
|
$
|
2,117,034
|
|
|
Lease premium, net
|
|
37,259
|
|
|
50,891
|
|
|
|
|
|
|
|
|
|
|
$
|
1,501,858
|
|
|
$
|
2,167,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Movements
in maintenance rights intangible during the years ended December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
Maintenance rights intangible at beginning of period
|
|
$
|
2,117,034
|
|
|
$
|
3,068,318
|
|
|
EOL and MR contract maintenance rights expense
|
|
(355,845
|
)
|
|
(381,637
|
)
|
|
MR contract maintenance rights write-off due to maintenance liability release
|
|
(77,494
|
)
|
|
(173,971
|
)
|
|
EOL contract maintenance rights write-off due to cash receipt
|
|
(106,433
|
)
|
|
(96,503
|
)
|
|
EOL and MR contract intangible write-off due to sale of aircraft
|
|
(112,663
|
)
|
|
(284,411
|
)
|
|
Transfer to other assets
|
|
|
|
|
(17,162
|
)
|
|
Additions due to aircraft acquisitions
|
|
|
|
|
2,400
|
|
|
|
|
|
|
|
|
Maintenance rights intangible at end of period
|
|
$
|
1,464,599
|
|
|
$
|
2,117,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-24
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
7. Maintenance rights intangible and lease premium, net (Continued)
The
following tables present details of lease premium and related accumulated amortization as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Gross carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Lease premium
|
|
$
|
77,977
|
|
|
$
|
(40,718
|
)
|
|
$
|
37,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Gross carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Lease premium
|
|
$
|
94,959
|
|
|
$
|
(44,068
|
)
|
|
$
|
50,891
|
|
|
Lease
premiums that are fully amortized are removed from the gross carrying amount and accumulated amortization columns in the tables above.
During
the years ended December 31, 2017, 2016 and 2015, we recorded amortization expense for lease premium of $13.6 million, $19.8 million and $23.0 million,
respectively.
As
of December 31, 2017, the estimated future amortization expense for lease premium was as follows:
|
|
|
|
|
|
|
|
Estimated
amortization
expense
|
|
2018
|
|
$
|
11,219
|
|
|
2019
|
|
10,466
|
|
|
2020
|
|
7,727
|
|
|
2021
|
|
5,394
|
|
|
2022
|
|
914
|
|
|
Thereafter
|
|
1,539
|
|
|
|
|
|
|
|
|
$
|
37,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8. Flight equipment held for sale
Generally, an aircraft is classified as held for sale when the sale is probable, the aircraft is available for sale in its present condition, and the aircraft is expected to be sold
within one year. Aircraft are reclassified from flight equipment held for operating leases to flight equipment held for sale at the lower of the aircraft carrying value or fair value, less costs to
sell. Depreciation is no longer recognized for aircraft classified as held for sale.
As
of December 31, 2017, 18 aircraft with a total net book value of $630.8 million met the held for sale criteria and were classified as flight equipment held for sale in
our Consolidated Balance Sheet. Aggregate maintenance and security deposit amounts received from the lessee of approximately $115 million will be assumed by the buyers of these aircraft upon
consummation of the individual sale transactions.
F-25
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
8. Flight equipment held for sale (Continued)
As
of December 31, 2016, six aircraft and four engines with a total net book value of $107.4 million were classified as flight equipment held for sale in our Consolidated
Balance Sheet. Two of those aircraft were no longer subject to sale agreements and were reclassified to flight equipment held for operating leases during the first quarter of 2017 and the sale of the
remaining four aircraft and four engines closed during the first quarter of 2017.
9. Other intangibles, net
Other intangibles consisted of the following as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Goodwill
|
|
$
|
58,094
|
|
|
$
|
58,094
|
|
|
Customer relationships, net
|
|
283,118
|
|
|
304,294
|
|
|
Contractual vendor intangible assets
|
|
10,606
|
|
|
21,019
|
|
|
Tradename, net
|
|
3,694
|
|
|
13,694
|
|
|
|
|
|
|
|
|
|
|
$
|
355,512
|
|
|
$
|
397,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following tables present details of customer relationships and tradename and related accumulated amortization as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Gross carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Customer relationships
|
|
$
|
360,000
|
|
|
$
|
(76,882
|
)
|
|
$
|
283,118
|
|
|
Tradename
|
|
40,000
|
|
|
(36,306
|
)
|
|
3,694
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
|
|
$
|
(113,188
|
)
|
|
$
|
286,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Gross carrying
amount
|
|
Accumulated
amortization
|
|
Net carrying
amount
|
|
Customer relationships
|
|
$
|
360,000
|
|
|
$
|
(55,706
|
)
|
|
$
|
304,294
|
|
|
Tradename
|
|
40,000
|
|
|
(26,306
|
)
|
|
13,694
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
400,000
|
|
|
$
|
(82,012
|
)
|
|
$
|
317,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the years ended December 31, 2017, 2016 and 2015, we recorded amortization expense for customer relationships and tradename of $31.2 million, $31.9 million
and $33.7 million, respectively.
During
the years ended December 31, 2016 and 2015, we recognized impairment charges of $14.9 million and $24.8 million, respectively, of other intangible assets
related to the downsizing of AeroTurbine. The amounts were recorded in transaction, integration and restructuring related expenses in our Consolidated Income Statements. Please refer to
Note 25
AeroTurbine restructuring
for further details.
F-26
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
9. Other intangibles, net (Continued)
During
the years ended December 31, 2017 and 2016, we utilized $10.4 million and $17.8 million, respectively, of contractual vendor intangible assets to reduce the
cash outlay related to purchases of goods and services from our vendors.
As
of December 31, 2017, the estimated future amortization expense for customer relationships and tradename was as follows:
|
|
|
|
|
|
|
|
Estimated
amortization
expense
|
|
2018
|
|
$
|
24,870
|
|
|
2019
|
|
21,176
|
|
|
2020
|
|
21,176
|
|
|
2021
|
|
21,176
|
|
|
2022
|
|
21,176
|
|
|
Thereafter
|
|
177,238
|
|
|
|
|
|
|
|
|
$
|
286,812
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. Other assets
Other assets consisted of the following as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Inventory
|
|
$
|
38,972
|
|
|
$
|
52,673
|
|
|
Debt issuance costs
|
|
43,241
|
|
|
33,700
|
|
|
Lease incentives
|
|
213,684
|
|
|
177,128
|
|
|
Other receivables
|
|
351,925
|
|
|
188,759
|
|
|
Investments (Note 11)
|
|
122,946
|
|
|
118,783
|
|
|
Notes receivables
|
|
22,497
|
|
|
23,359
|
|
|
Derivative assets (Note 12)
|
|
48,896
|
|
|
37,187
|
|
|
Other tangible fixed assets
|
|
31,114
|
|
|
36,427
|
|
|
Straight-line rents, prepaid expenses and other
|
|
106,655
|
|
|
111,190
|
|
|
|
|
|
|
|
|
|
|
$
|
979,930
|
|
|
$
|
779,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
11. Investments
Investments accounted for under the equity method of accounting consisted of the following as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ownership as of
December 31,
2017
(%)
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
AerDragon
|
|
16.7
|
|
$
|
61,706
|
|
|
$
|
60,124
|
|
|
AerLift
|
|
39.3
|
|
44,930
|
|
|
45,087
|
|
|
ACSAL
|
|
19.4
|
|
14,197
|
|
|
13,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
120,833
|
|
|
$
|
118,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
share of undistributed earnings of investments in which our ownership interest is less than 50% was $40.2 million and $38.4 million as of December 31, 2017 and
2016, respectively. We also have an investment in Peregrine of $2.1 million as of December 31, 2017, that is accounted for in accordance with the cost method of accounting. Please refer
to Note 27
Variable interest entities
for further details.
12. Derivative assets
We have entered into interest rate derivatives to hedge the current and future interest rate payments on our variable rate debt. These derivative financial instruments can include
interest rate swaps, caps, floors, options and forward contracts.
As
of December 31, 2017, we had interest rate caps and swaps outstanding, with underlying variable benchmark interest rates ranging from one to three-month U.S. dollar LIBOR.
Some
of our agreements with derivative counterparties require a two-way cash collateralization of derivative fair values. As of December 31, 2017 and 2016, we had cash collateral
of $3.7 million and $8.6 million, respectively, from various counterparties and the obligation to return such collateral was recorded in accounts payable, accrued expenses and other
liabilities. We had not advanced any cash collateral to counterparties as of December 31, 2017 or 2016.
The
counterparties to our interest rate derivatives are primarily major international financial institutions. We continually monitor our positions and the credit ratings of the
counterparties involved and limit the amount of credit exposure to any one party. We could be exposed to potential losses due to the credit risk of non-performance by these counterparties. We have not
experienced any material losses to date.
F-28
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
12. Derivative assets (Continued)
Our
derivative assets are recorded in other assets in our Consolidated Balance Sheets. The following table presents notional amounts and fair values of derivatives outstanding as of
December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
|
|
Notional
amount (a)
|
|
Fair
value
|
|
Notional
amount (a)
|
|
Fair
value
|
|
Derivative assets not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps
|
|
$
|
2,721,000
|
|
|
$
|
25,021
|
|
|
$
|
2,911,220
|
|
|
$
|
30,362
|
|
|
Derivative assets designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
1,830,785
|
|
|
$
|
23,875
|
|
|
$
|
425,612
|
|
|
$
|
6,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative assets
|
|
|
|
|
$
|
48,896
|
|
|
|
|
|
$
|
37,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
notional amount is recorded as nil where caps and swaps are not yet effective.
We
recorded the following in other comprehensive income related to derivative financial instruments for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
Effective portion of change in fair market value of derivatives designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
$
|
17,049
|
|
|
$
|
6,846
|
|
|
$
|
385
|
|
|
Income tax effect
|
|
(2,131
|
)
|
|
(856
|
)
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
Net changes in cash flow hedges, net of tax
|
|
$
|
14,918
|
|
|
$
|
5,990
|
|
|
$
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We
do not expect to reclassify amounts from AOCI to interest expense in our Consolidated Income Statement over the next 12 months. The following table presents the effect of
derivatives recorded in interest expense in our Consolidated Income Statements for the years ended December 31, 2017, 2016 and 2015.
F-29
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
12. Derivative assets (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Gain (Loss)
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedges:
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps and swaps
|
|
$
|
(14,178
|
)
|
|
$
|
(1,628
|
)
|
|
$
|
(18,118
|
)
|
|
Reclassification to Consolidated Income Statements:
|
|
|
|
|
|
|
|
|
|
|
Reclassification of amounts previously recorded in AOCI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect from derivatives
|
|
$
|
(14,178
|
)
|
|
$
|
(1,628
|
)
|
|
$
|
(18,118
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. Accounts payable, accrued expenses and other liabilities
Accounts payable, accrued expenses and other liabilities consisted of the following as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Accounts payable and accrued expenses
|
|
$
|
307,391
|
|
|
$
|
330,437
|
|
|
Deferred revenue
|
|
452,846
|
|
|
463,090
|
|
|
Accrued interest
|
|
254,865
|
|
|
287,205
|
|
|
Guarantees (Note 29)
|
|
2,272
|
|
|
51,804
|
|
|
|
|
|
|
|
|
|
|
$
|
1,017,374
|
|
|
$
|
1,132,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14. Accrued maintenance liability
Movements in accrued maintenance liability during the years ended December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
Accrued maintenance liability at beginning of period
|
|
$
|
2,750,576
|
|
|
$
|
3,185,794
|
|
|
Maintenance payments received
|
|
756,314
|
|
|
794,711
|
|
|
Maintenance payments returned
|
|
(523,403
|
)
|
|
(505,407
|
)
|
|
Release to income upon sale
|
|
(275,360
|
)
|
|
(341,161
|
)
|
|
Release to income other than upon sale
|
|
(302,408
|
)
|
|
(421,332
|
)
|
|
Lessor contribution, top ups and other
|
|
42,379
|
|
|
8,315
|
|
|
Interest accretion
|
|
13,701
|
|
|
26,563
|
|
|
Additions due to aircraft acquisitions
|
|
|
|
|
3,093
|
|
|
|
|
|
|
|
|
Accrued maintenance liability at end of period
|
|
$
|
2,461,799
|
|
|
$
|
2,750,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15. Debt
As of December 31, 2017, the principal amount of our outstanding indebtedness totaled $28.3 billion, which excluded fair value adjustments of $0.3 billion and debt
issuance costs and debt discounts of $0.2 billion. As of December 31, 2017, our undrawn lines of credit were approximately $6.7 billion, subject to certain conditions, including
compliance with certain financial covenants. As of December 31, 2017, we remained in compliance with the respective financial covenants across our various debt obligations.
F-30
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
The
following table provides a summary of our indebtedness as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Debt Obligation
|
|
Collateral
(Number of
aircraft)
|
|
Commitment
|
|
Undrawn
amounts
|
|
Outstanding
|
|
Weighted
average
interest
rate (a)
|
|
Maturity
|
|
Outstanding
|
|
Unsecured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ILFC Legacy Notes
|
|
|
|
|
$
|
5,670,000
|
|
|
$
|
|
|
|
$
|
5,670,000
|
|
|
6.32%
|
|
2018 - 2022
|
|
|
$
|
7,670,000
|
|
|
AerCap Aviation Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
|
AerCap Trust & AICDC Notes
|
|
|
|
|
8,399,864
|
|
|
|
|
|
8,399,864
|
|
|
4.12%
|
|
2019 - 2027
|
|
|
6,399,864
|
|
|
Asia Revolving Credit Facility
|
|
|
|
|
600,000
|
|
|
300,000
|
|
|
300,000
|
|
|
3.44%
|
|
2020
|
|
|
|
|
|
Citi Revolving Credit Facility
|
|
|
|
|
3,895,000
|
|
|
3,895,000
|
|
|
|
|
|
|
|
2021
|
|
|
|
|
|
AIG Revolving Credit Facility
|
|
|
|
|
200,000
|
|
|
200,000
|
|
|
|
|
|
|
|
2019
|
|
|
|
|
|
Other unsecured debt
|
|
|
|
|
550,000
|
|
|
|
|
|
550,000
|
|
|
3.11%
|
|
2020 - 2021
|
|
|
|
|
|
Fair value adjustment
|
|
|
|
|
NA
|
|
|
NA
|
|
|
286,426
|
|
|
NA
|
|
NA
|
|
|
430,348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL UNSECURED
|
|
|
|
|
19,314,864
|
|
|
4,395,000
|
|
|
15,206,290
|
|
|
|
|
|
|
|
14,800,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Export credit facilities
|
|
71
|
|
|
1,241,262
|
|
|
|
|
|
1,241,262
|
|
|
2.59%
|
|
2018 - 2027
|
|
|
1,722,376
|
|
|
Senior Secured Notes
|
|
81
|
|
|
1,275,000
|
|
|
|
|
|
1,275,000
|
|
|
7.13%
|
|
2018
|
|
|
1,275,000
|
|
|
Institutional secured term loans & secured portfolio loans
|
|
239
|
|
|
6,943,431
|
|
|
690,000
|
|
|
6,253,431
|
|
|
3.55%
|
|
2020 - 2030
|
|
|
5,028,623
|
|
|
ALS II debt
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,746
|
|
|
AerFunding Revolving Credit Facility
|
|
18
|
|
|
2,500,000
|
|
|
1,621,576
|
|
|
878,424
|
|
|
3.43%
|
|
2022
|
|
|
596,819
|
|
|
AeroTurbine Revolving Credit Agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,000
|
|
|
Other secured debt
|
|
94
|
|
|
2,139,360
|
|
|
|
|
|
2,139,360
|
|
|
3.66%
|
|
2018 - 2035
|
|
|
2,670,325
|
|
|
Fair value adjustment
|
|
|
|
|
NA
|
|
|
NA
|
|
|
31,482
|
|
|
NA
|
|
NA
|
|
|
82,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SECURED
|
|
|
|
|
14,099,053
|
|
|
2,311,576
|
|
|
11,818,959
|
|
|
|
|
|
|
|
11,518,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ECAPS Subordinated Notes
|
|
|
|
|
1,000,000
|
|
|
|
|
|
1,000,000
|
|
|
4.47%
|
|
2065
|
|
|
1,000,000
|
|
|
Junior Subordinated Notes
|
|
|
|
|
500,000
|
|
|
|
|
|
500,000
|
|
|
6.50%
|
|
2045
|
|
|
500,000
|
|
|
Subordinated debt joint ventures partners
|
|
|
|
|
55,780
|
|
|
|
|
|
55,780
|
|
|
2.26%
|
|
2022
|
|
|
55,780
|
|
|
Fair value adjustment
|
|
|
|
|
NA
|
|
|
NA
|
|
|
(229
|
)
|
|
NA
|
|
NA
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL SUBORDINATED
|
|
|
|
|
1,555,780
|
|
|
|
|
|
1,555,551
|
|
|
|
|
|
|
|
1,555,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs and debt discounts
|
|
|
|
|
NA
|
|
|
NA
|
|
|
(160,061
|
)
|
|
NA
|
|
NA
|
|
|
(156,901
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
503
|
|
|
$
|
34,969,697
|
|
|
$
|
6,706,576
|
|
|
$
|
28,420,739
|
|
|
|
|
|
|
|
$
|
27,716,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
weighted average interest rate for our floating rate debt is calculated based on the U.S. dollar LIBOR rate as of the last interest payment date of the
respective debt, and excludes the impact of related derivative financial instruments which we hold to hedge our exposure to floating interest rates, as well as any amortization of debt issuance costs
and debt discounts.
F-31
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
As
of December 31, 2017, all debt was guaranteed by us with the exception of the AerFunding revolving credit facility and the Glide Funding term loan facility. As of
December 31, 2017, a further $166.1 million included in other secured debt was limited recourse in nature.
Maturities
of our debt financings (excluding fair value adjustments, debt issuance costs and debt discounts) as of December 31, 2017 were as follows:
|
|
|
|
|
|
|
|
Maturities of
debt financing
|
|
2018
|
|
$
|
3,177,358
|
|
|
2019
|
|
4,191,915
|
|
|
2020
|
|
4,201,661
|
|
|
2021
|
|
3,671,914
|
|
|
2022
|
|
6,315,915
|
|
|
Thereafter
|
|
6,704,358
|
|
|
|
|
|
|
|
|
$
|
28,263,121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
the years ended December 31, 2017, 2016 and 2015, we recorded amortization expense for debt issuance costs and debt discounts of $65.4 million, $55.8 million
and $45.6 million, respectively. The unamortized debt issuance costs and debt discounts as of December 31, 2017 are expected to be amortized through 2045.
ILFC Legacy Notes
As of December 31, 2017, we had an aggregate outstanding principal amount of senior unsecured notes of $5.7 billion issued by ILFC
prior to the ILFC Transaction (the "ILFC Legacy Notes"). The ILFC Legacy Notes have maturities ranging through 2022. The fixed rate notes bear interest at rates ranging from 3.875% to 8.625%. The
notes are not subject to redemption prior to their stated maturity and there are no sinking fund requirements.
The
indentures governing the ILFC Legacy Notes contain customary covenants that, among other things, restrict our, and our restricted subsidiaries', ability to
(i)
incur liens on assets;
(ii)
declare or pay dividends or acquire or retire shares of
our capital stock during certain events of default;
(iii)
designate restricted subsidiaries as unrestricted subsidiaries or designate
unrestricted subsidiaries;
(iv)
make investments in or transfer assets to unrestricted subsidiaries; and
(v)
consolidate, merge, sell, or
otherwise dispose of all or substantially all of our assets. The indentures also provide for customary events of
default, including, but not limited to, the failure to pay scheduled principal and interest payments on the notes, the failure to comply with covenants and agreements specified in the indentures, the
acceleration of certain other indebtedness resulting from non-payment of that indebtedness and certain events of insolvency. If any event of default occurs, any amount then outstanding under the
indentures may immediately become due and payable.
Upon
consummation of the ILFC Transaction, AerCap Trust became the successor issuer under the ILFC Legacy Notes indentures. ILFC also agreed to continue to be co-obligor. In addition,
AerCap Holdings N.V. and certain of its subsidiaries became guarantors of the ILFC Legacy Notes.
F-32
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
AerCap Aviation Notes
In May 2012, AerCap Aviation Solutions B.V. issued $300.0 million of 6.375% senior unsecured notes due 2017 (the "AerCap Aviation
Notes"). The AerCap Aviation Notes were guaranteed by AerCap Holdings N.V. and AerCap Ireland. In May 2017 we repaid the AerCap Aviation Notes in full.
AerCap Trust & AICDC Notes
From time to time since the completion of the ILFC Transaction, AerCap Trust and AICDC have co-issued additional senior unsecured notes (the
"AGAT/AICDC Notes"). The proceeds from these offerings have been used for general corporate purposes.
The
following table provides a summary of the outstanding AGAT/AICDC Notes as of December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Amount
outstanding
|
|
Interest rate
|
|
Maturity
|
|
May 2014 Notes
|
|
$
|
2,199,864
|
|
|
3.75% - 4.50%
|
|
2019 - 2021
|
|
|
September 2014 Notes
|
|
800,000
|
|
|
5.00%
|
|
2021
|
|
|
June 2015 Notes
|
|
1,000,000
|
|
|
4.25% - 4.625%
|
|
2020 - 2022
|
|
|
October 2015 Notes
|
|
1,000,000
|
|
|
4.625%
|
|
2020
|
|
|
May 2016 Notes
|
|
1,000,000
|
|
|
3.95%
|
|
2022
|
|
|
January 2017 Notes
|
|
600,000
|
|
|
3.50%
|
|
2022
|
|
|
July 2017 Notes
|
|
1,000,000
|
|
|
3.65%
|
|
2027
|
|
|
November 2017 Notes
|
|
800,000
|
|
|
3.50%
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,399,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
January 2018, AerCap Trust and AICDC co-issued $600 million aggregate principal amount of 3.30% senior notes due 2023 and $550 million aggregate principal amount of
3.875% senior notes due 2028. The proceeds from the offering were used for general corporate purposes.
The
AGAT/AICDC Notes are registered with the SEC. The AGAT/AICDC Notes are jointly and severally and fully and unconditionally guaranteed by AerCap Holdings N.V. (the "Parent
Guarantor") and by AerCap Ireland, AerCap Aviation Solutions, ILFC and AerCap U.S. Global Aviation LLC. Except as described below, the AGAT/AICDC Notes are not subject to redemption prior to
their stated maturity and there are no sinking fund requirements. We may redeem each series of the AGAT/AICDC Notes in whole or in part, at any time, at a price equal to 100% of the aggregate
principal amount plus the applicable "make-whole" premium plus accrued and unpaid interest, if any, to the redemption date. The "make-whole" premium is the excess of:
(i)
the sum of the present value at such redemption date of all remaining scheduled payments of principal and interest on
such note through the stated maturity date of the notes (excluding accrued but unpaid interest to the redemption date), discounted to the date of redemption using a discount rate equal to the treasury
rate plus 50 basis points; over
(ii)
the principal amount of the notes to be redeemed.
F-33
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
The
indentures governing the AGAT/AICDC Notes contain customary covenants that, among other things, restrict our, and our restricted subsidiaries', ability to incur liens on assets and
to consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets. The indentures also provide for customary events of default, including, but not limited to, the failure to
pay scheduled principal and interest payments on the AGAT/AICDC Notes, the failure to comply with covenants and agreements specified in the indentures, the acceleration of certain other indebtedness
resulting from non-payment of that indebtedness and certain events of insolvency. If any event of default occurs, any amount then outstanding under the indentures may immediately become due and
payable.
Asia Revolving Credit Facility
In December 2015, AerCap Holdings N.V. entered into a $575.0 million unsecured revolving and term loan agreement (the "Asia
Revolver"). In 2016, the facility was increased to $600.0 million. The Asia Revolver is a five-year facility, split between a three-year revolving period followed by a two-year term loan. The
interest rate for borrowings under the Asia Revolver is LIBOR plus a margin of 1.95% during the revolving period, with the margin increasing to 2.25% during the first year of the term loan and
increasing to 2.50% during the second year of the term loan.
The
outstanding principal amount of any loans under the Asia Revolver at the end of the three-year revolving period will be amortized over the remaining two-year term out period of the
facility. One-third of the balance is to be repaid in December 2019 and the remaining two-thirds must be repaid in December 2020.
All
borrowings under the Asia Revolver are subject to the satisfaction of customary conditions precedent. We have the right to terminate or cancel, in whole or in part, the unused
portion of the commitment amount.
The
Asia Revolver contains covenants customary for unsecured financings, including financial covenants that require us to maintain compliance with a maximum ratio of consolidated
indebtedness to shareholders' equity, a minimum fixed charges coverage ratio and a maximum ratio of unencumbered assets to certain financial indebtedness.
Citi Revolving Credit Facility
In March 2014, AICDC entered into a $2.75 billion four-year senior unsecured revolving credit facility (the "Citi Revolver"), which
became effective upon completion of the ILFC Transaction. The facility has an accordion feature permitting increases to a maximum size of $4.0 billion. The obligations under the Citi Revolver
are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
In
February 2017, the facility was upsized to $3.75 billion and the maturity of the facility was extended to February 2021. The interest rate for borrowings under the Citi
Revolver was reduced from a base rate of LIBOR plus a margin of 2.0% for drawn facilities to a margin of 1.50%. In September 2017, the facility was upsized to $3.895 billion and in February
2018, the facility was further upsized to $4.0 billion, in each case with the same pricing levels. All borrowings under the facility are subject to the satisfaction of customary conditions
precedent. We have the right to terminate or cancel, in whole or in part, the unused portion of the commitment amount.
F-34
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
The Citi Revolver contains covenants customary for unsecured financings, including financial covenants that require us to maintain compliance with a maximum ratio of consolidated
indebtedness to shareholders' equity, a minimum interest coverage ratio and a maximum ratio of unencumbered assets to certain financial indebtedness. The facility also contains covenants that, among
other things, restrict, subject to certain exceptions, the ability of AerCap to sell assets, make certain restricted payments and incur certain liens.
AIG Revolving Credit Facility
In December 2013, AICDC entered into a $1.0 billion five-year senior unsecured revolving credit facility (the "AIG Revolver"), with AIG
as lender and administrative agent, which became effective upon completion of the ILFC Transaction. The interest rate for borrowings under the facility is, at our option, either
(i)
LIBOR plus
3.75%; or
(ii)
2.75% plus the greatest of
(x)
the U.S. federal funds rate plus 0.50%;
(y)
the
rate of interest publicly announced
from time to time by Citibank, N.A. as its "base rate;" and
(z)
one-month LIBOR plus 1.00%. The obligations under the AIG Revolver are guaranteed
by AerCap Holdings N.V. and certain of its subsidiaries.
In
June 2015, the amount available under the AIG revolving credit facility was reduced from $1.0 billion to $500.0 million upon the issuance of the Junior Subordinated
Notes.
In
December 2017, the amount available under the AIG revolving credit facility was reduced from $500.0 million to $200.0 million and the maturity of the facility was
extended from May 2019 to October 2019. All other terms remain unchanged.
All
borrowings under the facility are subject to the satisfaction of customary conditions precedent. We have the right to terminate or cancel, in whole or in part, the unused portion of
the commitment amount.
The
AIG Revolver contains covenants customary for unsecured financings, including financial covenants that require us to maintain compliance with a maximum ratio of consolidated
indebtedness to shareholders' equity, a minimum interest coverage ratio and a maximum ratio of unencumbered assets to certain financial indebtedness. The facility also contains covenants that, among
other things, restrict, subject to certain exceptions, the ability of AerCap to sell assets, make certain restricted payments and incur certain liens.
F-35
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Export credit facilities
The net book value of aircraft pledged under the export credit facilities was approximately $3.0 billion as of December 31, 2017.
The
following table provides details regarding the terms of our outstanding export credit facilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
Collateral
(Number of
aircraft)
|
|
Amount
outstanding
|
|
Tranche
|
|
Weighted average
interest rate
|
|
Maturity
|
2003 Airbus ECA facility
|
|
11
|
|
|
$
|
85,961
|
|
|
Floating Rate
|
|
Three month LIBOR +
0.43%
|
|
2018 - 2020
|
2004 Airbus ECA facility
|
|
23
|
|
|
159,856
|
|
|
Floating Rate
|
|
Six month LIBOR +
1.49%
|
|
2018 - 2019
|
|
|
8
|
|
|
52,412
|
|
|
Fixed Rate
|
|
3.85%
|
|
2018 - 2020
|
2008 Airbus ECA facility
|
|
2
|
|
|
73,118
|
|
|
Floating Rate
|
|
Three month LIBOR +
0.97%
|
|
2022 - 2023
|
|
|
11
|
|
|
241,682
|
|
|
Fixed Rate
|
|
2.70%
|
|
2021 - 2023
|
2009 Airbus ECA facility
|
|
2
|
|
|
30,602
|
|
|
Floating Rate
|
|
Three month LIBOR +
1.11%
|
|
2022
|
|
|
2
|
|
|
30,194
|
|
|
Fixed Rate
|
|
4.60%
|
|
2021 - 2022
|
Airbus ECA capital markets facilities
|
|
3
|
|
|
89,806
|
|
|
Fixed Rate
|
|
3.60%
|
|
2021
|
Other Airbus ECA facilities
|
|
5
|
|
|
281,458
|
|
|
Fixed Rate
|
|
2.38%
|
|
2024 - 2027
|
2010 Ex-Im facilities
|
|
2
|
|
|
23,923
|
|
|
Fixed Rate
|
|
2.95%
|
|
2022
|
2012 Ex-Im capital markets facility
|
|
2
|
|
|
172,250
|
|
|
Fixed Rate
|
|
1.49%
|
|
2025
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
71
|
|
|
$
|
1,241,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
February 2018, the 2004 Airbus ECA facility was fully repaid and terminated.
The
principal amounts under the export credit facilities amortize over ten to 12-year terms. The export credit facilities require that SPEs controlled by the respective borrowers hold
legal title to the financed aircraft. The export credit facilities obligations are secured by, among other things, a pledge of the shares of the SPEs.
The
export credit facilities contain affirmative covenants customary for secured financings, in addition to customary events of default and restrictive covenants. The facilities also
contain net worth financial covenants. As of December 31, 2017, AerCap was in compliance with its covenants under the export credit facilities.
The
obligations under export credit facilities are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries, as well as various export credit agencies.
F-36
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Senior Secured Notes
In
August 2010, ILFC issued $3.9 billion of senior secured notes (the "Senior Secured Notes"), with $1.35 billion that matured in September 2014 and bore interest of 6.5%,
$1.275 billion that matured in September 2016 and bore interest of 6.75%, and $1.275 billion maturing in September 2018 and bearing interest of 7.125%. Upon consummation of the ILFC
Transaction, AerCap Trust became the successor issuer under the indenture governing the Senior Secured Notes. ILFC also agreed to continue to be a co-obligor. We can redeem the Senior Secured Notes at
any time prior to their maturity, subject to a penalty of the greater of 1.00% of the outstanding principal amount and a "make-whole" premium based on the relevant U.S. Treasury Rate plus 50 basis
points. There is no sinking fund for the Senior Secured Notes.
The
obligations of the subsidiary borrower are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
The
Senior Secured Notes are secured by a designated pool of aircraft and cash collateral when required. In addition, two of our subsidiaries, which either own or hold leases attached to
the aircraft included in the pool securing the Senior Secured Notes, have guaranteed the notes.
The
indenture and the aircraft mortgage and security agreement governing the Senior Secured Notes contain customary covenants that, among other things, restrict our, and our restricted
subsidiaries', ability to
(i)
create liens;
(ii)
sell, transfer or otherwise dispose of
the assets serving as collateral for the Senior Secured Notes;
(iii)
declare or pay dividends or acquire or retire shares of our capital stock
during certain events of default;
(iv)
designate restricted subsidiaries as unrestricted subsidiaries or designate unrestricted subsidiaries; and
(v)
make investments in or transfer assets to unrestricted subsidiaries.
The
indenture restricts our, and the subsidiary guarantors', ability to consolidate, merge, sell or otherwise dispose of all, or substantially all, of our assets. The indenture also
provides for customary events of default, including, but not limited to, the failure to pay scheduled principal and interest payments on the Senior Secured Notes, the failure to comply with covenants
and agreements specified in the indenture, the acceleration of certain other indebtedness resulting from non-payment of that indebtedness, and certain events of insolvency. If any event of default
occurs, any amount then outstanding under the Senior Secured Notes may immediately become due and payable.
Institutional secured term loans & secured portfolio loans
Hyperion facility
In
March 2014, one of ILFC's indirect wholly-owned subsidiaries entered into a secured term loan agreement in the amount of $1.5 billion. In January 2017, the facility was amended
to extend the maturity to October 2023 and to reduce the margin above LIBOR from 2.75% to 2.25%. In August 2017, the facility was amended to reduce the margin above LIBOR to 2.00%. The facility was
amended again in March 2018 to further reduce the margin above LIBOR to 1.75%. We can voluntarily prepay the loan at any time, subject to certain conditions.
The
obligations of the subsidiary borrower are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
F-37
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
The
loan is secured by the equity interests in the borrower and certain SPE subsidiaries of the borrower. The SPEs hold title to 81 aircraft with an appraised value of approximately
$2.23 billion as of December 31, 2017, representing a loan-to-value ratio of approximately 67%. The loan requires a loan-to-value ratio of no more than 70%. If the maximum loan-to-value
ratio is exceeded, we will be required to prepay portions of the outstanding loans, deposit an amount in the cash collateral account or transfer additional aircraft to SPEs, subject to certain
concentration criteria, so that the ratio is equal to or less than 70%.
The
loan contains customary covenants and events of default, including covenants that limit the ability of the subsidiary borrower and its subsidiaries to incur additional indebtedness
and create liens, and covenants that limit the ability of the guarantors, the subsidiary borrower and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and
enter into transactions with affiliates.
Vancouver facility
In
February 2012, one of ILFC's indirect wholly-owned subsidiaries entered into a secured term loan agreement in the amount of $900.0 million. In April 2013, ILFC amended the
agreement and simultaneously prepaid $150.0 million of the outstanding principal amount, reducing the amount outstanding to $750.0 million. In December 2016, the facility was amended to
extend the maturity to October 2022 and to reduce the margin above LIBOR from 2.75% to 2.25%. In August 2017, the facility was amended to reduce the margin above LIBOR to 2.00%. The facility was
amended again in February 2018 to further reduce the margin above LIBOR to 1.75%. We can voluntarily prepay the loan at any time, subject to certain conditions.
The
obligations of the subsidiary borrower are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
The
loan is secured by the equity interests in certain SPEs of the subsidiary borrower. As of December 31, 2017, the SPEs collectively own a portfolio of 51 aircraft with an
appraised value of approximately $1.31 billion, equaling a loan-to-value ratio of approximately 57%. The loan requires a loan-to-value ratio of no more than 63%. If the maximum loan-to-value
ratio is exceeded, we will be required to prepay a portion of the outstanding loan, deposit an amount in the cash collateral account or transfer additional aircraft to SPEs, subject to certain
concentration criteria, so that the ratio is equal to or less than 63%.
The
loan contains customary covenants and events of default, including covenants that limit the ability of the subsidiary borrower and its subsidiaries to incur additional indebtedness
and create liens, and covenants that limit the ability of the guarantors, the subsidiary borrower and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets and
enter into transactions with affiliates.
F-38
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Temescal facility
In
March 2011, one of ILFC's indirect wholly-owned subsidiaries entered into a secured term loan agreement with lender commitments in the amount of approximately $1.3 billion,
which was subsequently increased to approximately $1.5 billion. As of December 31, 2017, approximately $773.7 million was outstanding. In February 2017, AerCap extended the
maturity of the Temescal facility from March 2021 to March 2023 and reduced the margin above LIBOR from 2.00% to 1.95%. We can voluntarily prepay the loan at any time, subject to certain conditions.
The
obligations of the subsidiary borrower are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
The
loan is secured by a portfolio of 50 aircraft and the equity interests in certain SPEs that own the pledged aircraft. As of the latest loan-to-value ratio determination date, the
appraised value of the pledged aircraft was $1.59 billion, resulting in a loan-to-value ratio of approximately 52%. The subsidiary borrower is required to maintain compliance with a maximum
loan-to-value ratio, which was 54% as of the latest loan-to-value ratio determination date. The maximum loan-to value ratio declines over time, as set forth in the term loan agreement. If the maximum
loan-to-value ratio is exceeded, we will be required to prepay portions of the outstanding loans, deposit an amount in the cash collateral account or transfer additional aircraft to the SPEs, subject
to certain concentration criteria, so that the ratio is equal to or less than the maximum loan-to-value ratio. As of December 31, 2017, we were in compliance with this ratio.
The
loan facility contains customary covenants and events of default, including covenants that limit the ability of the subsidiary borrower and its subsidiaries to incur additional
indebtedness and create liens, and covenants that limit the ability of the guarantors, the subsidiary borrower and its subsidiaries to consolidate, merge or dispose of all or substantially all of
their assets and enter into transactions with affiliates.
Glide Funding facility
Glide
Funding Limited ("Glide Funding") is a SPE that is a wholly-owned subsidiary of AerCap Ireland. Glide Funding is a consolidated subsidiary formed for the purpose of acquiring and
financing aircraft assets. In December 2015, Glide Funding entered into a non-recourse term loan credit facility in the aggregate amount of up to $500.0 million with a term of five years, which
would be used to finance the acquisition of up to nine specified aircraft under the facility.
As
of December 31, 2017, Glide Funding had $436.3 million of loans outstanding, relating to nine aircraft. Borrowings under the Glide Funding term loan facility bear
interest at a rate equal to one-month LIBOR plus 1.60%. Principal may be prepaid without penalty upon notice, subject to certain conditions. Mandatory partial prepayments of borrowings under the
facility are required in certain circumstances, including upon removal of an aircraft from the facility, unless an acceptable substitute aircraft is added to the facility. The loan obligations are
secured by, among other things, security interests in the equity ownership and beneficial interest in all of the subsidiaries of Glide Funding that own or lease its financed aircraft, and their
interests in the leases of the financed aircraft.
F-39
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
The
facility contains customary covenants and events of default, including covenants that limit the ability of Glide Funding and its subsidiaries to incur additional indebtedness and
create liens, to consolidate, merge or dispose of all or substantially all of their assets and to enter into transactions with affiliates.
Celtago facility
Celtago
Funding Limited ("Celtago") is a wholly-owned subsidiary of AerCap Ireland. Celtago was formed for the purpose of acquiring and financing aircraft assets. In December 2015,
Celtago entered into a secured term loan agreement with lender commitments in the amount of $817.0 million, which is being used to finance 13 aircraft, with a maturity date of December 2024.
Borrowings
under the term loan facility bear interest at three-month LIBOR plus a margin of 1.50%, or, if applicable, a base rate plus a margin of 1.50%. The loans can be voluntarily
prepaid at any time, subject to certain conditions. Celtago's obligations under the term loan facility are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries. As of
December 31, 2017, Celtago had $718.1 million of loans outstanding relating to 13 aircraft.
The
term loan facility contains customary covenants and events of default, including covenants that limit the ability of Celtago and its subsidiaries to incur additional indebtedness and
create liens, and covenants that limit the ability of the guarantors and Celtago and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets or enter into
transactions with affiliates.
BlowfishFunding facility
BlowfishFunding B.V.
("Blowfish") is a wholly-owned subsidiary of AerCap B.V. Blowfish was formed for the purpose of financing aircraft assets. In April 2016, Blowfish
entered into a new secured term loan agreement with lender commitments in the amount of $650.0 million, which is being used to finance nine aircraft. The loan has a maturity date of December
2022.
Borrowings
under the term loan facility bear interest at three-month LIBOR plus a margin of 1.65%, or, if applicable, a base rate plus a margin of 1.65%. The loans can be voluntarily
prepaid at any time, subject to certain conditions. Blowfish's obligations under the term loan facility are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries. As of
December 31, 2017, Blowfish had $580.1 million of loans outstanding relating to nine aircraft.
The
term loan facility contains customary covenants and events of default, including covenants that limit the ability of Blowfish and its subsidiaries to incur additional indebtedness
and create liens, and covenants that limit the ability of the guarantors and Blowfish and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets or enter into
transactions with affiliates.
Celtago II facility
Celtago
II Funding Limited ("Celtago II") is a wholly-owned subsidiary of AerCap Ireland. Celtago II was formed for the purpose of acquiring and financing aircraft assets. In July 2016,
Celtago II entered into a new secured term loan agreement with lender commitments in the amount of $684.0 million, which is being used to finance 13 aircraft. The loan has a maturity date of
November 2022.
F-40
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Borrowings
under the term loan facility bear interest at three-month LIBOR plus a margin of 1.75%, or, if applicable, a base rate plus a margin of 1.75%. The loans can be voluntarily
prepaid at any time, subject to certain conditions. Celtago II's obligations under the term loan facility are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries. As of
December 31, 2017, Celtago II had $629.8 million of loans outstanding relating to 13 aircraft.
The
term loan facility contains customary covenants and events of default, including covenants that limit the ability of Celtago II and its subsidiaries to incur additional indebtedness
and create liens, and covenants that limit the ability of the guarantors and Celtago II and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets or enter into
transactions with affiliates.
Iridium facility
Iridium
Funding Limited ("Iridium") is a wholly-owned subsidiary of AerCap Ireland. Iridium was formed for the purpose of acquiring and financing aircraft assets. In November 2016,
Iridium entered a new secured term loan agreement with lender commitments in the amount of $595.0 million, which is being used to finance eight aircraft. The loan has a maturity date of May
2024.
Borrowings
under the term loan facility bear interest at three-month LIBOR plus a margin of 1.75%, or, if applicable, a base rate plus a margin of 1.75%. The loans can be voluntarily
prepaid at any time, subject to certain conditions. Iridium's obligations under the term loan facility are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries. As of
December 31, 2017, Iridium had $559.3 million of loans outstanding relating to eight aircraft.
The
term loan facility contains customary covenants and events of default, including covenants that limit the ability of Iridium and its subsidiaries to incur additional indebtedness and
create liens, and covenants that limit the ability of the guarantors and Iridium and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets or enter into
transactions with affiliates.
Scandium facility
Scandium
Funding Limited ("Scandium") is a wholly-owned subsidiary of AerCap Ireland. Scandium was formed for the purpose of acquiring and financing aircraft assets. In December 2017,
Scandium entered a new secured term loan agreement with lender commitments in the amount of $805.0 million, which is being used to finance up to 11 aircraft. The loan has a maturity date of May
2025.
Borrowings
under the term loan facility bear interest at three-month LIBOR plus a margin of 1.60%, or, if applicable, a base rate plus a margin of 1.60%. The loans can be voluntarily
prepaid at any time, subject to certain conditions. Scandium's obligations under the term loan facility are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries. As of
December 31, 2017, Scandium had $113.5 million of loans outstanding relating to one aircraft.
The
term loan facility contains customary covenants and events of default, including covenants that limit the ability of Scandium and its subsidiaries to incur additional indebtedness
and create liens, and covenants that limit the ability of the guarantors and Scandium and its subsidiaries to consolidate, merge or dispose of all or substantially all of their assets or enter into
transactions with affiliates.
F-41
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
ALS II debt
In
June 2008, we completed a securitization in which ALS II, a SPE formed for the purpose of the securitization, issued securitized class A-1 notes and class A-2 notes,
representing interests in certain lease receivables, to holders who committed to advance funds in connection with the purchase of certain aircraft. The ALS II senior Class A notes were repaid
in full in January 2017.
AerFunding Revolving Credit Facility
AerFunding
1 Limited ("AerFunding") is a SPE whose share capital is owned 95% by a charitable trust and 5% by AerCap Ireland. AerFunding is a consolidated subsidiary formed for the
purpose of acquiring aircraft assets. In April 2006, AerFunding entered into a non-recourse senior secured revolving credit facility in the aggregate amount of up to $1.0 billion.
In
August 2017, the facility was amended to allow for a three-year revolving period, effective December 11, 2017 and on December 11, 2017, the maximum facility size
increased to $2.5 billion. Following the revolving credit period,there is a two year term out period to December 2022. The maturity date of the AerFunding revolving credit facility is
December 10, 2022.
The
net book value of aircraft pledged to lenders under the credit facility was $1.1 billion as of December 31, 2017.
Borrowings
under the AerFunding revolving credit facility can be used to finance between 73.5% and 80.0% of the lower of the purchase price and the appraised value of the eligible
aircraft. Eligible aircraft include Airbus A320 Family, Airbus A330 and Airbus A350 aircraft, Boeing 737-700, 800, 900ER and MAX aircraft, Boeing 777 aircraft, Boeing 787
aircraft, and Embraer E190 and E195 aircraft. In addition, value enhancing expenditures and required liquidity reserves are also funded by the lenders. All borrowings under the AerFunding revolving
credit facility are subject to the satisfaction of customary conditions and restrictions on the purchase of aircraft that would result in our portfolio becoming too highly concentrated, with regard to
both aircraft type and geographical location. The borrowing period during which new advances may be made under the facility will expire in December 2020.
Borrowings
under the AerFunding revolving credit facility bear interest based on the Eurodollar rate plus the applicable margin. The following table presents the applicable margin for
the borrowings under the AerFunding revolving credit facility during the periods specified:
|
|
|
|
|
Applicable
margin
|
Borrowing period (a)
|
|
2.00%
|
Period from December 11, 2020 to December 10, 2021
|
|
2.75%
|
Period from December 11, 2021 to December 10, 2022
|
|
3.50%
|
-
(a)
-
The
borrowing period is until December 10, 2020, after which the loan converts to a term loan.
Additionally,
we are subject to
(i)
a 0.375% fee on any portion of the unused loan commitment if the average facility utilization
is greater than 50% during a period; or
(ii)
a 0.50% fee on any unused portion of the unused loan commitment if the average facility utilization
is less than 50% during a period.
F-42
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Interest
on the loans is due on a monthly basis. Principal on the loans amortizes on a monthly basis to the extent funds are available. All outstanding principal not paid during the term
is due on the maturity date.
Advances
under the AerFunding revolving credit facility may be prepaid without penalty upon notice, subject to certain conditions. Mandatory partial prepayments of borrowings under the
AerFunding revolving credit facility are required:
-
-
Upon the sale of certain assets by the borrower, including any aircraft or aircraft engines financed or refinanced with proceeds from the
AerFunding revolving credit facility;
-
-
Upon the occurrence of an event of loss with respect to an aircraft or aircraft engine financed with proceeds from the AerFunding revolving
credit facility from the proceeds of insurance claims; and
-
-
Upon the securitization of any interests or leases with respect to aircraft or aircraft engines financed with proceeds from the AerFunding
revolving credit facility.
AerFunding
is required to maintain up to 5.0% of the borrowing value of the aircraft in reserve for the benefit of the lenders. Amounts held in reserve for the benefit of the lenders are
available to the extent that there are insufficient funds to pay required expenses, hedge payments, or principal of or interest on the loans on any payment date. The amounts on reserve are funded by
the lenders. Borrowings under the AerFunding revolving credit facility are secured by, among other things, security interests in and pledges or assignments of equity ownership and beneficial interests
in all of the subsidiaries of AerFunding, as well as by AerFunding's interests in the leases of its assets.
AeroTurbine Revolving Credit Agreement
In
November 2014, AeroTurbine entered into an amended and restated credit facility providing for a maximum aggregate available amount of $550.0 million, subject to availability
determined by a calculation utilizing AeroTurbine's aircraft assets and accounts receivable. In February 2017, the facility was fully repaid and terminated.
F-43
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
Other secured debt
AerCap Holdings N.V. has entered into various other commercial bank financings to fund the purchase of aircraft and for general corporate
purposes. The following table provides details regarding the terms of these financings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Collateral
(Number of
aircraft)
|
|
Amount
outstanding
|
|
Tranche
|
|
Weighted average
interest rate
|
|
Maturity
|
|
SkyFunding I facility
|
|
7
|
|
|
$
|
126,617
|
|
|
Floating rate
|
|
3 month LIBOR plus 2.85%
|
|
2021-2022
|
|
|
|
|
5
|
|
|
90,140
|
|
|
Fixed rate
|
|
4.56%
|
|
2021-2022
|
|
|
Camden facility
|
|
7
|
|
|
144,894
|
|
|
Fixed rate
|
|
3.90%
|
|
2022
|
|
|
AerCap Partners I facility
|
|
7
|
|
|
59,851
|
|
|
Floating rate
|
|
3 month LIBOR plus 1.65%
|
|
2020
|
|
|
StratusFunding facility
|
|
2
|
|
|
143,482
|
|
|
Floating rate
|
|
3 month LIBOR plus 1.95%
|
|
2026
|
|
|
|
|
2
|
|
|
142,988
|
|
|
Fixed rate
|
|
3.93%
|
|
2021-2026
|
|
|
CieloFunding facility
|
|
1
|
|
|
35,968
|
|
|
Floating rate
|
|
3 month LIBOR plus 2.60%
|
|
2020
|
|
|
|
|
2
|
|
|
56,862
|
|
|
Fixed rate
|
|
3.68%
|
|
2020
|
|
|
CieloFunding II facility
|
|
1
|
|
|
25,122
|
|
|
Floating rate
|
|
3 month LIBOR plus 2.10%
|
|
2020
|
|
|
|
|
1
|
|
|
26,840
|
|
|
Fixed rate
|
|
3.14%
|
|
2020
|
|
|
CloudFunding facilities
|
|
15
|
|
|
200,781
|
|
|
Fixed rate
|
|
4.00%
|
|
2022-2026
|
|
|
Secured commercial bank financings
|
|
32
|
(a)
|
|
855,916
|
|
|
Floating rate
|
|
LIBOR plus 2.10%
|
|
2018-2026
|
|
|
|
|
12
|
|
|
229,899
|
|
|
Fixed rate
|
|
4.13%
|
|
2018-2035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
94
|
|
|
$
|
2,139,360
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
22
engines are pledged as collateral in addition to the aircraft.
In
January 2018, the SkyFunding I facility was fully repaid and terminated.
The
majority of the financings are secured by, among other things, a pledge of the shares of the subsidiaries owning the related aircraft, a guarantee from AerCap Holdings N.V.
and, in certain cases, a mortgage on the applicable aircraft. All of our financings contain affirmative covenants customary for secured financings.
ECAPS Subordinated Notes
In December 2005, ILFC issued two tranches of subordinated notes in an aggregate principal amount of $1.0 billion. The
$400.0 million tranche had a call option date of December 21, 2015 and had a fixed interest rate of 6.25% until the 2015 call option date. We did not exercise the call option. After the
call option date, the interest rate changed to a floating rate, with a margin of 1.80% plus the highest of three-month LIBOR, ten-year constant maturity treasury, and 30-year constant maturity
treasury. The interest rate on the $600.0 million tranche is a floating rate with a margin of 1.55% plus the highest of three-month LIBOR, ten-year constant maturity treasury, and 30-year
constant maturity treasury. We can call either tranche at any time and the interest rate resets quarterly.
F-44
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
In
July 2013, ILFC amended the financial tests in both tranches of notes by changing the method of calculating the ratio of equity to total managed assets and the minimum fixed charge
coverage ratio. Failure to comply with these financial tests will result in a "mandatory trigger event." If a mandatory trigger event occurs and we are unable to raise sufficient capital in a manner
permitted by the terms of the subordinated debt to cover the next interest payment on the subordinated debt, a "mandatory deferral event" will occur, requiring us to defer all interest payments and
prohibiting the payment of cash dividends on AerCap Trust's or ILFC's capital stock or its equivalent until both financial tests are met or we have raised sufficient capital to pay all accumulated and
unpaid interest on the subordinated debt. Mandatory trigger events and mandatory deferral events are not events of default under the indenture governing the subordinated debt.
Upon
consummation of the ILFC Transaction, the subordinated notes were assumed by AerCap Trust, and AerCap Holdings N.V. and certain of its subsidiaries became guarantors. ILFC
remains a co-obligor under the indentures governing the subordinated notes.
Junior Subordinated Notes
In June 2015, AerCap Trust issued $500.0 million of junior subordinated notes due 2045. The Junior Subordinated Notes initially bear
interest at a fixed interest rate of 6.50%, and beginning in June 2025, will bear interest at a floating rate of three-month LIBOR plus 4.30%. The notes were issued to AIG as payment for a portion of
the Share Repurchase from AIG. The amount available under the AIG revolving credit facility was reduced from $1.0 billion to $500.0 million upon the issuance of the Junior Subordinated
Notes. AIG no longer holds any of the Junior Subordinated Notes.
We
may defer any interest payments on the Junior Subordinated Notes for up to five consecutive years for one or more deferral periods. At the end of five years following the commencement
of any deferral period, we must pay all accrued and unpaid deferred interest, including compounded interest. During a deferral period, interest will continue to accrue on the Junior Subordinated Notes
and deferred interest will bear additional interest, compounded on each interest payment date. If we have paid all deferred interest (including compounded interest thereon) on the Junior Subordinated
Notes, then we may again defer interest payments.
The
Junior Subordinated Notes are guaranteed by AerCap Holdings N.V. and certain of its subsidiaries.
F-45
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
15. Debt (Continued)
We
may at our option redeem the Junior Subordinated Notes before their maturity
(i)
in whole or in part, at any time and from time
to time, on or after June 15, 2025 at 100% of their principal amount plus any accrued and unpaid interest thereon;
(ii)
in whole, but not
in part, before June 15, 2025 at the make-whole redemption price, if an applicable rating agency makes certain changes to the equity credit criteria for securities such as the Junior
Subordinated Notes;
(iii)
in whole, but not in part, at any time at 100% of their principal amount plus any accrued and unpaid interest thereon
in the event that we become or would become obligated to pay any additional amounts as a result of a change in tax laws, regulations or official interpretations; or
(iv)
in whole, but not in part,
at 101% of their principal amount plus any accrued and unpaid interest thereon within 60 days after the
occurrence of a "change of control triggering event" consisting of a change of control and a decline in the rating of our senior unsecured debt securities by two applicable rating agencies. In the
event that we do not redeem the Junior Subordinated Notes in connection with a change of control triggering event, the then-applicable annual interest rate borne by the Junior Subordinated Notes will
increase by 5.00%.
The
Junior Subordinated Notes are junior subordinated unsecured obligations, rank equally with all of AerCap Trust's future equally ranking junior subordinated indebtedness, if any, and
are subordinate and junior in right of payment to all of AerCap Trust's existing and future senior indebtedness.
Subordinated debt in joint venture partners
In 2008 and 2010, AerCap Holdings N.V. and our joint venture partners each subscribed a total of approximately $64.3 million of
subordinated loan notes. The subordinated debt held by AerCap Holdings N.V. is eliminated in consolidation of the joint ventures. Interest on the subordinated loan notes accrues at a rate of
15.00% per annum in the case of the AerCap Partners II joint venture. In the case of the AerCap Partners I and AerCap Partners 767 joint ventures, interest originally accrued on the subordinated loan
notes at a rate of 20.00% per annum, and following an amendment entered into in June 2013, the interest rate was reduced to 0% effective as of January 1, 2013. Where
(i)
the amount which,
pursuant to the terms of the senior facility, is available to the joint ventures to make payments in respect of, amongst
other things, the subordinated loan notes is insufficient to meet the interest payments; or
(ii)
the terms of the senior facility prohibit the
payment in full of interest on the relevant payment date, then the joint venture partners must pay the maximum amount of interest that can properly be paid to the note holders on the relevant interest
payment date and the unpaid interest carries interest at a rate of 19.50% per annum until paid.
The
collateral granted in respect of the subordinated loan notes also secures the senior facility. The rights of the holders of subordinated loan notes in respect of this security are
subordinated to the rights of the senior facility lenders, amongst others. The subordinated loan notes are fully subordinated in all respects including in priority of payment to, amongst other debts
of the joint ventures, a senior debt facility. As is the case in respect of the senior facility, the obligation of the joint ventures to make payments in respect of the subordinated loan notes is
limited in recourse to certain amounts actually received by the joint ventures.
Subject
to certain conditions, including (while the senior facility security remains outstanding) the consent of the collateral trustee, the joint venture partners may at any time redeem
all or any of the outstanding subordinated loan notes.
F-46
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes
Our subsidiaries are subject to taxation in a number of tax jurisdictions, principally Ireland, the United States, and the Netherlands.
The
following table presents our provision for income taxes by tax jurisdiction for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Deferred tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
$
|
144,532
|
|
|
$
|
141,364
|
|
|
$
|
151,623
|
|
|
United States
|
|
56,650
|
|
|
(41,163
|
)
|
|
(65,341
|
)
|
|
The Netherlands
|
|
(7,470
|
)
|
|
(8,346
|
)
|
|
(7,453
|
)
|
|
Other
|
|
(14,188
|
)
|
|
14,124
|
|
|
22,130
|
|
|
|
|
|
|
|
|
|
|
|
|
179,524
|
|
|
105,979
|
|
|
100,959
|
|
|
Deferred tax expense (benefit) related to an increase (decrease) in changes in valuation allowance of deferred tax assets
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
1,366
|
|
|
1,562
|
|
|
|
|
|
United States
|
|
(29,147
|
)
|
|
54,056
|
|
|
10,074
|
|
|
The Netherlands
|
|
(8,518
|
)
|
|
12,843
|
|
|
13,915
|
|
|
Other
|
|
13,796
|
|
|
(13,100
|
)
|
|
(13,922
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(22,503
|
)
|
|
55,361
|
|
|
10,067
|
|
|
Current tax expense (benefit)
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
5,606
|
|
|
4,730
|
|
|
(99
|
)
|
|
United States
|
|
(1,659
|
)
|
|
3,166
|
|
|
39,358
|
|
|
The Netherlands
|
|
717
|
|
|
1,164
|
|
|
37,512
|
|
|
Other
|
|
3,033
|
|
|
3,096
|
|
|
2,008
|
|
|
|
|
|
|
|
|
|
|
|
|
7,697
|
|
|
12,156
|
|
|
78,779
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
164,718
|
|
|
$
|
173,496
|
|
|
$
|
189,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
The
following table provides a reconciliation of the statutory income tax expense to provision for income taxes for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Income tax expense at statutory income tax rate of 12.5%
|
|
$
|
154,484
|
|
|
$
|
150,050
|
|
|
$
|
170,712
|
|
|
Permanent differences
|
|
23,737
|
(a)
|
|
29,057
|
(b)
|
|
29,555
|
(c)
|
|
Foreign rate differential
|
|
(13,503
|
)
|
|
(5,611
|
)
|
|
(10,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
10,234
|
|
|
23,446
|
|
|
19,093
|
|
|
|
|
|
|
|
|
|
|
Provision for income taxes
|
|
$
|
164,718
|
|
|
$
|
173,496
|
|
|
$
|
189,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
2017 permanent differences included non-deductible share-based compensation in Ireland and in the Netherlands, impacts of the change in tax rate in the United
States, and a valuation allowance change in respect of U.S., Dutch and Irish tax losses.
-
(b)
-
The
2016 permanent differences included non-deductible share-based compensation in Ireland and in the Netherlands, non-deductible intercompany interest allocated to
the United States, and a valuation allowance taken in respect of U.S., Dutch and Irish tax losses.
-
(c)
-
The
2015 permanent differences included the non-deductible intercompany interest allocated to the United States, non-deductible share-based compensation in the
Netherlands, non-deductible costs relating to the transfer of certain functions from the Netherlands to Ireland, and a valuation allowance taken in respect of U.S. and Dutch tax losses.
The
following tables present our foreign rate differential by tax jurisdiction for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
Pre-tax income
(loss)
|
|
Local statutory
tax rate (a)
|
|
Variance to Irish
statutory tax
rate of 12.5%
|
|
Tax variance as
a result of global
activities (b)
|
|
Tax jurisdiction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
$
|
1,212,029
|
|
|
12.5%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
United States
|
|
72,390
|
|
|
35.7%
|
|
|
23.2
|
%
|
|
16,744
|
|
|
The Netherlands
|
|
(61,086
|
)
|
|
25.0%
|
|
|
12.5
|
%
|
|
(7,636
|
)
|
|
Isle of Man
|
|
185,882
|
|
|
0.0%
|
|
|
(12.5
|
)%
|
|
(23,235
|
)
|
|
Other
|
|
9,138
|
|
|
19.3%
|
|
|
6.8
|
%
|
|
624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income
|
|
$
|
1,418,353
|
|
|
|
|
|
|
|
|
$
|
(13,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent differences (c)
|
|
(182,481
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax
|
|
$
|
1,235,872
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
Pre-tax income
(loss)
|
|
Local statutory
tax rate (a)
|
|
Variance to Irish
statutory tax
rate of 12.5%
|
|
Tax variance as
a result of global
activities (b)
|
|
Tax jurisdiction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
$
|
1,151,387
|
|
|
12.5%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
United States
|
|
44,238
|
|
|
36.3%
|
|
|
23.8
|
%
|
|
10,529
|
|
|
The Netherlands
|
|
37,580
|
|
|
25.0%
|
|
|
12.5
|
%
|
|
4,698
|
|
|
Isle of Man
|
|
181,286
|
|
|
0.0%
|
|
|
(12.5
|
)%
|
|
(22,661
|
)
|
|
Other
|
|
18,989
|
|
|
22.1%
|
|
|
9.6
|
%
|
|
1,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income
|
|
$
|
1,433,480
|
|
|
|
|
|
|
|
|
$
|
(5,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent differences (d)
|
|
(233,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax
|
|
$
|
1,200,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
Pre-tax income
(loss)
|
|
Local statutory
tax rate (a)
|
|
Variance to Irish
statutory tax
rate of 12.5%
|
|
Tax variance as
a result of global
activities (b)
|
|
Tax jurisdiction
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
$
|
1,212,190
|
|
|
12.5%
|
|
|
0.0
|
%
|
|
$
|
|
|
|
United States
|
|
(43,825
|
)
|
|
36.3%
|
|
|
23.8
|
%
|
|
(10,430
|
)
|
|
The Netherlands
|
|
175,897
|
|
|
25.0%
|
|
|
12.5
|
%
|
|
21,987
|
|
|
Isle of Man
|
|
181,118
|
|
|
0.0%
|
|
|
(12.5
|
)%
|
|
(22,640
|
)
|
|
Other
|
|
77,671
|
|
|
13.3%
|
|
|
0.8
|
%
|
|
621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income
|
|
$
|
1,603,051
|
|
|
|
|
|
|
|
|
$
|
(10,462
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permanent differences (e)
|
|
(237,352
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income tax
|
|
$
|
1,365,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
The
local statutory income tax expense for our significant tax jurisdictions (Ireland, the United States, the Netherlands and Isle of Man) does not differ from the
actual income tax expense.
-
(b)
-
The
tax variance as a result of global activities is primarily caused by our operations in countries with a higher or lower statutory tax rate than the statutory tax
rate in Ireland.
-
(c)
-
The
2017 permanent differences included non-deductible share-based compensation in Ireland and in the Netherlands, impacts of the change in tax rate in the United
States, and a valuation allowance change in respect of U.S., Dutch and Irish tax losses.
-
(d)
-
The
2016 permanent differences included non-deductible share-based compensation in Ireland and in the Netherlands, non-deductible intercompany interest allocated to
the United States, and a valuation allowance taken in respect of U.S., Dutch and Irish tax losses.
-
(e)
-
The
2015 permanent differences included the non-deductible intercompany interest allocated to the United States, non-deductible share-based compensation in the
Netherlands, non-deductible costs relating to the transfer of certain functions from the Netherlands to Ireland, and a valuation allowance taken in respect of U.S. and Dutch tax losses.
F-49
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
The
calculation of income for tax purposes differs significantly from book income. Deferred income tax is provided to reflect the impact of temporary differences between the amounts of
assets and liabilities for financial reporting purposes and such amounts as measured under tax law in the various jurisdictions. Tax loss carry forwards and accelerated tax depreciation on flight
equipment held for operating leases give rise to the most significant timing differences.
The
following tables provide details regarding the principal components of our deferred income tax liabilities and assets by jurisdiction as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Ireland
|
|
United States
|
|
The
Netherlands
|
|
Other
|
|
Total
|
|
Depreciation/Impairment
|
|
$
|
(1,336,757
|
)
|
|
$
|
1,553
|
|
|
$
|
9,138
|
|
|
$
|
327
|
|
|
$
|
(1,325,739
|
)
|
|
Intangibles
|
|
(4,159
|
)
|
|
(5,341
|
)
|
|
|
|
|
|
|
|
(9,500
|
)
|
|
Interest expense
|
|
|
|
|
(166
|
)
|
|
|
|
|
|
|
|
(166
|
)
|
|
Accrued maintenance liability
|
|
(4,362
|
)
|
|
4,055
|
|
|
|
|
|
|
|
|
(307
|
)
|
|
Obligations under capital leases and debt obligations
|
|
(4,691
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,691
|
)
|
|
Investments
|
|
|
|
|
(8,095
|
)
|
|
|
|
|
|
|
|
(8,095
|
)
|
|
Deferred losses on sale of assets
|
|
|
|
|
32,119
|
|
|
|
|
|
|
|
|
32,119
|
|
|
Accrued expenses
|
|
|
|
|
7,338
|
|
|
|
|
|
|
|
|
7,338
|
|
|
Valuation allowance
|
|
(2,928
|
)
|
|
(59,983
|
)
|
|
(18,240
|
)
|
|
(23,707
|
)
|
|
(104,858
|
)
|
|
Losses and credits forward
|
|
850,774
|
|
|
59,260
|
|
|
26,047
|
|
|
25,731
|
|
|
961,812
|
|
|
Other
|
|
(70,042
|
)
|
|
(2,543
|
)
|
|
(542
|
)
|
|
2,500
|
|
|
(70,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax (liabilities) assets
|
|
$
|
(572,165
|
)
|
|
$
|
28,197
|
|
|
$
|
16,403
|
|
|
$
|
4,851
|
|
|
$
|
(522,714
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-50
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2016
|
|
|
|
Ireland
|
|
United States
|
|
The
Netherlands
|
|
Other
|
|
Total
|
|
Depreciation/Impairment
|
|
$
|
(1,030,901
|
)
|
|
$
|
(16,322
|
)
|
|
$
|
8,547
|
|
|
$
|
(63
|
)
|
|
$
|
(1,038,739
|
)
|
|
Intangibles
|
|
(6,353
|
)
|
|
(16,242
|
)
|
|
|
|
|
|
|
|
(22,595
|
)
|
|
Interest expense
|
|
|
|
|
(588
|
)
|
|
|
|
|
|
|
|
(588
|
)
|
|
Accrued maintenance liability
|
|
(6,028
|
)
|
|
12,810
|
|
|
|
|
|
|
|
|
6,782
|
|
|
Obligations under capital leases and debt obligations
|
|
(3,151
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,151
|
)
|
|
Investments
|
|
|
|
|
(12,641
|
)
|
|
|
|
|
|
|
|
(12,641
|
)
|
|
Deferred losses on sale of assets
|
|
|
|
|
66,119
|
|
|
|
|
|
|
|
|
66,119
|
|
|
Accrued expenses
|
|
|
|
|
13,942
|
|
|
|
|
|
|
|
|
13,942
|
|
|
Valuation allowance
|
|
(1,562
|
)
|
|
(89,130
|
)
|
|
(26,758
|
)
|
|
(9,911
|
)
|
|
(127,361
|
)
|
|
Losses and credits forward
|
|
666,214
|
|
|
92,215
|
|
|
26,759
|
|
|
20,693
|
|
|
805,881
|
|
|
Other
|
|
(46,133
|
)
|
|
5,539
|
|
|
(4,399
|
)
|
|
(6,190
|
)
|
|
(51,183
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax (liabilities) assets
|
|
$
|
(427,914
|
)
|
|
$
|
55,702
|
|
|
$
|
4,149
|
|
|
$
|
4,529
|
|
|
$
|
(363,534
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
net deferred income tax liabilities as of December 31, 2017 of $522.7 million were recognized in our Consolidated Balance Sheet as deferred income tax assets of
$151.2 million and as deferred income tax liabilities of $673.9 million.
The
net deferred income tax liabilities as of December 31, 2016 of $363.5 million were recognized in our Consolidated Balance Sheet as deferred income tax assets of
$215.4 million and as deferred income tax liabilities of $579.0 million.
The
following table presents the movements in the valuation allowance for deferred income tax assets during the years ended December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
Valuation allowance at beginning of period
|
|
$
|
127,361
|
|
|
$
|
72,000
|
|
|
(Decrease) increase of allowance to income tax provision
|
|
(22,503
|
)
|
|
55,361
|
|
|
|
|
|
|
|
|
Valuation allowance at end of period
|
|
$
|
104,858
|
|
|
$
|
127,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
valuation allowance as of December 31, 2017 of $104.9 million included $2.9 million related to loss carry forwards in Ireland, $60.0 million related to
having insufficient sources of projected taxable income to fully realize the deferred tax asset in the United States, $18.2 million related to loss carry forwards in the Netherlands and
$23.7 million related to losses and credit forwards in Australia.
F-51
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
The
valuation allowance as of December 31, 2016 of $127.4 million included $1.6 million related to loss carry forwards in Ireland, $89.1 million related to
having insufficient sources of projected taxable income to fully realize the deferred tax asset in the United States, particularly in respect of our U.S. subsidiary AeroTurbine, $26.8 million
related to loss carry forwards in the Netherlands, and $9.9 million related to losses and credit forwards in Australia.
As
of December 31, 2017 and 2016, we had $31.0 million and $29.8 million, respectively, of unrecognized tax benefits. Substantially all of the unrecognized tax
benefits as of December 31, 2017, if recognized, would affect our effective tax rate. Although it is reasonably possible that a change in the balance of unrecognized tax benefits may occur
within the next 12 months, based on the information currently available, we do not expect any change to be material to our consolidated financial condition.
Our
primary tax jurisdictions are Ireland, the United States and the Netherlands. Our tax returns are open for examination in Ireland from 2013 forward, in the United States from 2014
forward and in the Netherlands from 2012 forward. In the United States, the 2014 and 2015 audits of the federal income tax returns of some of our U.S. resident subsidiaries closed without adjustment
in 2017.
Our
policy is to recognize accrued interest on the underpayment of income taxes as a component of interest expense and penalties associated with tax liabilities as a component of
provision for income taxes.
Ireland
Since 2006, the enacted Irish corporate income tax rate has been 12.5%. Some of our Irish tax-resident operating subsidiaries have significant
losses carry forward as of December 31, 2017 which give rise to deferred income tax assets. The availability of these losses does not expire with time. In addition, the vast majority of all of
our Irish tax-resident subsidiaries are entitled to accelerated aircraft depreciation for tax purposes and shelter net taxable income with the surrender of losses on a current year basis within the
Irish tax group. Based on projected taxable profits in our Irish subsidiaries, we expect to recover the majority of the value of our Irish tax assets and have not recognized a valuation allowance
against such assets, with the exception of $2.9 million, as of December 31, 2017.
United States
Our U.S. subsidiaries are assessable to federal and state U.S. taxes. Since the ILFC Transaction, we no longer file one consolidated federal
income tax return. We have two distinct groups of U.S. companies that file consolidated returns. The blended federal and state tax rate applicable to our combined U.S. group was 35.7% for the year
ended December 31, 2017. Due to a restructuring of activities in the U.S. AeroTurbine group, which started in late 2015, we do not expect to generate sufficient sources of taxable income to
realize our deferred income tax asset in the United States. Additionally, certain tax attributes are subject to an annual limitation as a result of the change in ownership in 2015 as defined under
Internal Revenue Code Section 382. Our U.S. federal net operating losses expire between 2026 and 2037.
On
December 22, 2017, the United States enacted new tax legislation (the "Tax Legislation") that significantly revises the Internal Revenue Code of 1986, as amended. The Tax
Legislation included, among other things, a reduction of the U.S. corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the Tax Legislation, we reassessed our
deferred tax assets and liabilities and recorded a tax expense in 2017 of approximately $22 million.
F-52
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
16. Income taxes (Continued)
The Netherlands
The majority of our Dutch subsidiaries are part of two Dutch fiscal unities and are included in consolidated tax filings. Current tax expenses
are limited with respect to the Dutch subsidiaries due to the existence of interest bearing intercompany liabilities. Deferred income tax is calculated using the Dutch corporate income tax rate
(25.0%). Tax losses in the Netherlands can generally be carried back one year and carried forward nine years before expiry.
17. Equity
In February 2016, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $400 million of AerCap ordinary shares through June 30,
2016. We completed this share repurchase program on June 1, 2016.
In
May 2016, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $250 million of AerCap ordinary shares through September 30,
2016. We completed this share repurchase program on September 7, 2016.
In
August 2016, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $250 million of AerCap ordinary shares through
December 31, 2016. We completed this share repurchase program on December 8, 2016.
In
November 2016, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $250 million of AerCap ordinary shares through March 31,
2017. We completed this share repurchase program on March 6, 2017.
In
February 2017, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $350 million of AerCap ordinary shares through June 30,
2017. We completed this share repurchase program on June 12, 2017.
In
May 2017, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $300 million of AerCap ordinary shares through September 30,
2017. In July 2017, this share repurchase program was extended to run through December 31, 2017. We completed this share repurchase program on September 26, 2017.
In
July 2017, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $250 million of AerCap ordinary shares through December 31,
2017. In October 2017, this share repurchase program was extended to run through March 31, 2018. We completed this share repurchase program on December 14, 2017.
In
October 2017, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $200 million of AerCap ordinary shares through March 31,
2018. We completed this share repurchase program on February 21, 2018.
In
February 2018, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $200 million of AerCap ordinary shares through June 30,
2018. As of March 2, 2018, the dollar amount remaining under this share repurchase program was $145.7 million. Please refer to Note 32
Subsequent
events
for further details.
F-53
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
17. Equity (Continued)
During
the year ended December 31, 2017, we repurchased an aggregate of 23,732,835 of our ordinary shares under our share repurchase programs at an average price, including
commissions, of $47.39 per ordinary share.
Between
January 1, 2018 and March 2, 2018, we repurchased an aggregate of 4,076,603 of our ordinary shares under our share repurchase programs at an average price,
including commissions, of $52.40 per ordinary share.
During
the year ended December 31, 2017, our Board of Directors cancelled 20,000,000 ordinary shares which were acquired through the share repurchase programs in accordance with
the authorizations obtained from the Company's shareholders.
In
January 2018, we cancelled 5,000,000 ordinary shares and in March 2018, we cancelled a further 6,000,000 ordinary shares, which were acquired through the share repurchase
programs in accordance with the authorizations obtained from the Company's shareholders.
Movements
in AOCI for the years ended December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in
fair value of
derivatives
|
|
Actuarial gain
(loss)
on pension
obligations
|
|
Total
|
|
Balance as of December 31, 2015
|
|
$
|
(18
|
)
|
|
$
|
(6,289
|
)
|
|
$
|
(6,307
|
)
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income (loss)
|
|
5,990
|
|
|
(1,452
|
)
|
|
4,538
|
|
|
Balance as of December 31, 2016
|
|
$
|
5,972
|
|
|
$
|
(7,741
|
)
|
|
$
|
(1,769
|
)
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
14,918
|
|
|
1,125
|
|
|
16,043
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
$
|
20,890
|
|
|
$
|
(6,616
|
)
|
|
$
|
14,274
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18. Share-based compensation
Under our equity incentive plans, we have granted restricted stock units, restricted stock and stock options to directors, officers and employees to attract and retain them on
competitive terms, and to incentivize superior performance with a view to creating long-term value for the benefit of the Company, its shareholders and other stakeholders.
AerCap Holdings N.V. Equity Grants
In March 2012, we implemented an equity incentive plan (the "Equity Incentive Plan 2012") which provides for the grant of stock options,
non-qualified stock options, restricted stock, restricted stock units, stock appreciation rights and other stock awards to participants of the plan selected by the Nomination and Compensation
Committee of our Board of Directors. Effective May 14, 2014, the Equity Incentive Plan 2012 was expanded and the maximum number of shares available under the plan is equivalent to 8,064,081
Company shares. The Equity Incentive Plan 2012 is not open for equity awards to our directors.
F-54
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
18. Share-based compensation (Continued)
On
May 14, 2014, we implemented an equity incentive plan (the "Equity Incentive Plan 2014") which provides for the grant of equity awards to participants of the plan selected by
the Nomination and Compensation Committee of our Board of Directors. The maximum number of shares available under the plan is equivalent to 4,500,000 Company shares. The Equity Incentive Plan 2014 is
open for equity awards to our directors.
The
Equity Incentive Plan 2014 replaced an equity incentive plan that was implemented in October 2006 (the "Equity Incentive Plan 2006"). The Equity Incentive Plan 2014, Equity Incentive
Plan 2012 and Equity Incentive Plan 2006 are collectively referred to herein as "AerCap Holdings N.V. Equity Plans." Prior awards remain in effect pursuant to their terms and conditions. The
terms and conditions of the Equity Incentive Plan 2006 and the Equity Incentive Plan 2014 are substantially the same.
The
terms and conditions, including the vesting conditions, of the equity awards granted under AerCap Holdings N.V. Equity Plans are determined by the Nomination and Compensation
Committee and, for our directors, by the Board of Directors in line with the remuneration policies approved by the General Meeting of Shareholders. The vesting periods of the majority of equity awards
range between three years and five years. Our long-term equity awards are subject to long-term performance vesting criteria, based on the Company's U.S. GAAP EPS budget over the specified
periods, in order to promote and encourage superior performance over a prolonged period of time. Some of our officers receive annual equity awards as part of their compensation package. Annual equity
awards are granted after the year end and the number of awards granted is dependent on the Company's actual performance relative to the U.S. GAAP EPS budget and the respective officer's
personal performance during the previous financial year. All outstanding awards of restricted stock units are convertible into ordinary shares of the Company at a ratio of one-to-one, prior to
deduction for payroll withholding taxes. Shares subject to outstanding equity awards, which are not issued or delivered by reason of, amongst others, the cancellation or forfeiture of such awards or
the withholding of such shares to settle tax obligations, shall again be available under the AerCap Holdings N.V. Equity Plans.
F-55
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
18. Share-based compensation (Continued)
The
following table presents movements in the outstanding restricted stock units and restricted stock under the AerCap Holdings N.V. Equity Plans during the year ended
December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
Number of time-
based restricted
stock units and
restricted stock
|
|
Number of
performance-based
restricted stock
units and restricted
stock
|
|
Weighted
average grant
date fair value of
time-based
grants ($)
|
|
Weighted average
grant date fair
value of
performance-
based grants ($)
|
|
Number at beginning of period
|
|
3,579,834
|
|
|
5,512,342
|
|
|
$
|
42.78
|
|
|
$
|
46.19
|
|
|
Granted (a)
|
|
740,690
|
|
|
1,079,416
|
|
|
50.68
|
|
|
51.49
|
|
|
Vested (b)
|
|
(859,033
|
)
|
|
(440,064
|
)
|
|
33.59
|
|
|
46.59
|
|
|
Cancelled
|
|
(85,404
|
)
|
|
(29,445
|
)
|
|
44.08
|
|
|
42.10
|
|
|
|
|
|
|
|
|
|
|
|
|
Number at end of period
|
|
3,376,087
|
|
|
6,122,249
|
|
|
$
|
46.85
|
|
|
$
|
47.12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
451,070 shares of restricted stock granted under the AerCap Holdings N.V. Equity Plans, of which 279,697 shares of restricted stock were issued with
the remaining 171,373 shares being withheld and applied to pay the taxes involved. As part of the 171,373 shares withheld to pay for taxes, 64,771 shares were treated as granted and subsequently
vested on the grant date under specific Irish tax legislation. As a result, we recognized an expense of $3.4 million on the grant dates associated with these shares.
-
(b)
-
296,201
restricted stock units, which were previously granted under the AerCap Holdings N.V. Equity Plans, vested. In connection with the vesting of the
restricted stock units, the Company issued, in full satisfaction of its obligations, 187,096 ordinary shares to the holders of these restricted stock units, with the remainder being withheld and
applied to pay the taxes in respect of those awards. Restrictions on 938,125 shares of restricted stock (655,207 shares of restricted stock net of withholding for taxes) lapsed during the period. In
addition, 64,771 shares were treated as granted and subsequently vested on the grant dates as described in (a) above.
Included
in the numbers of outstanding restricted stock units and restricted stock under the AerCap Holdings N.V. Equity Plans during the year ended December 31, 2017, as
shown in the table above, are a significant number of awards granted in December 2017 to replace awards which were granted in connection with the ILFC acquisition in 2014 and which are due to vest
during the first half of 2018. As a result, the number of outstanding restricted stock units and restricted stock awards as of December 31, 2017 reflects an overlap between previous awards that
are due to vest in 2018 (approximately 6.5 million awards are due to vest in 2018) and the recent replacement awards that have the objective of retaining and incentivizing the recipients for
future periods. As a result, we expect the total number of outstanding equity awards to become lower following the vesting of awards in 2018.
F-56
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
18. Share-based compensation (Continued)
The
following table presents movements in the outstanding stock options under the Equity Incentive Plan 2006 (no options were granted under the Equity Incentive Plan 2012 or Equity
Incentive Plan 2014) and the stock options that rolled over from the amalgamation of Genesis in 2010 during the year ended December 31, 2017. All of the outstanding Genesis amalgamation related
options have vested and been exercised. All outstanding options under the Equity Incentive Plan 2006 have vested.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
Number of options
|
|
Weighted average
exercise price ($)
|
|
Options outstanding at beginning of period (a)
|
|
140,045
|
|
|
$
|
6.02
|
|
|
Exercised (a)
|
|
(102,100
|
)
|
|
3.41
|
|
|
|
|
|
|
|
|
Options outstanding at end of period
|
|
37,945
|
|
|
$
|
13.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
2,100 AER options granted to former Genesis directors and employees at the closing of the amalgamation with Genesis on March 25, 2010. These options
were issued pursuant to a separate board resolution, and not under any of the AerCap Holdings N.V. Equity Plans. They have all vested as of December 31, 2017.
The
amount of share-based compensation expense is determined by reference to the fair value of the restricted stock units or restricted stock on the grant date, based on the trading
price of the Company's shares on the grant date and reflective of the probability of vesting. All outstanding options have been fully expensed.
We
recognized share-based compensation expense of $107.7 million, $102.8 million and $100.2 million during the years ended December 31, 2017, 2016 and 2015,
respectively. The following table presents our expected share-based compensation expense based on existing grants, assuming that the established performance criteria are met and that no forfeitures
occur:
|
|
|
|
|
|
|
|
Expected share-
based compensation
expense
|
|
|
|
(U.S. Dollars in
millions)
|
|
2018
|
|
$
|
75.5
|
|
|
2019
|
|
36.0
|
|
|
2020
|
|
19.0
|
|
|
2021
|
|
4.7
|
|
|
19. Pension plans
We operate defined benefit plans and defined contribution pension plans for our employees. All of these plans, individually or on an aggregate basis, do not have a material impact on our
Consolidated Balance Sheets or Consolidated Income Statements.
F-57
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
20. Geographic information
The following table presents
(i)
the percentage of lease revenue attributable to individual countries representing at least 10% of
our total lease revenue in any year presented; and
(ii)
the percentage of lease revenue attributable to Ireland, our country of domicile, based
on each lessee's principal place of business, for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
China (a)
|
|
$
|
648,343
|
|
|
13.8%
|
|
$
|
669,859
|
|
|
13.8%
|
|
$
|
656,809
|
|
|
13.2%
|
|
United States
|
|
568,999
|
|
|
12.1%
|
|
535,526
|
|
|
11.0%
|
|
538,686
|
|
|
10.8%
|
|
Ireland
|
|
120,500
|
|
|
2.6%
|
|
117,259
|
|
|
2.4%
|
|
58,571
|
|
|
1.2%
|
|
Other countries (b)
|
|
3,375,960
|
|
|
71.5%
|
|
3,544,979
|
|
|
72.8%
|
|
3,737,485
|
|
|
74.8%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,713,802
|
|
|
100.0%
|
|
$
|
4,867,623
|
|
|
100.0%
|
|
$
|
4,991,551
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
mainland China, Hong Kong and Macau.
-
(b)
-
No
individual country within this category accounts for more than 10% of our lease revenue.
The
following table presents
(i)
the percentage of long-lived assets, including flight equipment held for operating leases, flight
equipment held for sale, net investment in finance and sales-type leases and maintenance rights intangible assets, attributable to individual countries representing at least 10% of our total
long-lived assets in any year presented; and
(ii)
the percentage of long-lived assets attributable to Ireland, our country of domicile, based on
each lessee's principal place of business, as of December 31, 2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016 (c)
|
|
|
|
Amount
|
|
%
|
|
Amount
|
|
%
|
|
China (a)
|
|
$
|
5,218,057
|
|
|
14.7%
|
|
|
$
|
4,962,336
|
|
|
14.5%
|
|
|
United States
|
|
4,816,416
|
|
|
13.6%
|
|
|
4,752,971
|
|
|
13.9%
|
|
|
Ireland
|
|
1,141,992
|
|
|
3.2%
|
|
|
703,635
|
|
|
2.1%
|
|
|
Other countries (b)
|
|
24,231,703
|
|
|
68.5%
|
|
|
23,858,317
|
|
|
69.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,408,168
|
|
|
100.0%
|
|
|
$
|
34,277,259
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
mainland China, Hong Kong and Macau.
-
(b)
-
No
individual country within this category accounts for more than 10% of our long-lived assets.
-
(c)
-
Excludes
AeroTurbine long-lived assets of $105.7 million as of December 31, 2016.
We
lease and sell aircraft to airlines and others throughout the world and our trade and notes receivables are from entities located throughout the world. During the years ended
December 31, 2017, 2016 and 2015, we had no lessees that represented more than 10% of total lease revenue.
F-58
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
21. Selling, general and administrative expenses
Selling, general and administrative expenses consisted of the following for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Personnel expenses
|
|
$
|
156,726
|
|
|
$
|
149,505
|
|
|
$
|
161,967
|
|
|
Share-based compensation
|
|
107,719
|
|
|
102,843
|
|
|
100,162
|
|
|
Travel expenses
|
|
19,774
|
|
|
21,201
|
|
|
23,090
|
|
|
Professional services
|
|
28,585
|
|
|
30,983
|
|
|
42,921
|
|
|
Office expenses
|
|
16,105
|
|
|
20,703
|
|
|
26,989
|
|
|
Directors' expenses
|
|
3,345
|
|
|
3,051
|
|
|
2,780
|
|
|
Other expenses
|
|
16,037
|
|
|
22,726
|
|
|
23,399
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
348,291
|
|
|
$
|
351,012
|
|
|
$
|
381,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22. Other income
Other income consisted of the following for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
Management fees
|
|
$
|
13,426
|
|
|
$
|
18,298
|
|
|
$
|
23,094
|
|
|
|
Interest and other income
|
|
81,172
|
(a)
|
|
127,688
|
(b)
|
|
89,582
|
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
94,598
|
|
|
$
|
145,986
|
|
|
$
|
112,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Includes
income from lease terminations of $46.5 million.
-
(b)
-
Includes
income from lease terminations of $63.2 million, net insurance proceeds of $54.2 million and a gain related to the repayment of a note
receivable earlier than expected of $27.7 million. In addition, we incurred an expense of $36.0 million related to a lower of cost or market adjustment of AeroTurbine's parts inventory
as a result of the AeroTurbine downsizing. Please refer to Note 25
AeroTurbine restructuring.
-
(c)
-
Includes
income from net insurance proceeds of $16.2 million and the settlement of asset value guarantees of $22.6 million. In addition, we incurred an
expense of $38.7 million related to a lower of cost or market adjustment of AeroTurbine's parts inventory as a result of the AeroTurbine downsizing. Please refer to
Note 25
AeroTurbine restructuring.
F-59
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
23. Lease revenue
Our current operating lease agreements expire up to and over the next 14 years. The contracted minimum future lease payments receivable from lessees for flight equipment on
non-cancelable operating leases for our owned aircraft and engines as of December 31, 2017 were as follows:
|
|
|
|
|
|
|
|
Contracted minimum
future lease payments
receivable
|
|
2018
|
|
$
|
3,964,268
|
|
|
2019
|
|
3,497,545
|
|
|
2020
|
|
3,021,796
|
|
|
2021
|
|
2,704,523
|
|
|
2022
|
|
2,408,034
|
|
|
Thereafter
|
|
8,546,457
|
|
|
|
|
|
|
|
|
$
|
24,142,623
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24. Asset impairment
Asset impairment consisted of the following for the years ended December 31, 2017, 2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Flight equipment held for operating leases (Note 5)
|
|
$
|
54,331
|
|
|
$
|
78,335
|
|
|
$
|
16,322
|
|
|
Flight equipment held for sale
|
|
6,955
|
|
|
3,272
|
|
|
|
|
|
Other assets
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
61,286
|
|
|
$
|
81,607
|
|
|
$
|
16,335
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our
long-lived assets include flight equipment and definite-lived intangible assets. We test long-lived assets for impairment whenever events or changes in circumstances indicate that
the carrying amounts of the assets may not be recoverable.
During
the year ended December 31, 2017, we recognized impairment charges of $61.3 million on 13 aircraft and two engines. The impairment charges primarily related to lease
terminations for six aircraft and one engine. These impairments were more than offset by lease revenue that we recognized when we retained maintenance-related balances or received EOL compensation. In
addition, we recognized impairment charges for seven aircraft and one engine that were part of sale transactions. These impairments were partially offset by lease revenue that we recognized when we
retained maintenance-related balances.
During
the year ended December 31, 2016, we recognized impairment charges of $81.6 million on 35 aircraft. The impairment charges primarily related to lease terminations
and amendments of lease agreements for 25 aircraft. These impairments were more than offset by lease revenue that we recognized when we retained maintenance-related balances or received EOL
compensation. In addition, we recognized impairment charges for related to ten aircraft that were part of portfolio sale transactions.
F-60
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
24. Asset impairment (Continued)
During
the year ended December 31, 2015, we recognized impairment charges of $16.3 million, primarily related to eight aircraft and 12 engines. Four of the impaired
aircraft were redelivered from the respective lessees for which we retained maintenance-related balances or received EOL compensation. The impairment on the remaining four aircraft and 12 engines was
recognized as their net book values were no longer supportable based on our latest cash flow estimates for each of these assets.
During
the years ended December 31, 2016 and 2015, we also recognized impairment charges for certain AeroTurbine intangible assets and leased engines. Please refer to
Note 25
AeroTurbine restructuring
for further details.
25. AeroTurbine restructuring
At the end of 2015, we decided to restructure and downsize the AeroTurbine business. Since we made this decision, AeroTurbine has been actively reducing its debt and total assets by
disposing of engines from its engine leasing portfolio as well as parts from its inventory.
In
connection with the downsizing, during the year ended December 31, 2015, we performed recoverability assessments of AeroTurbine's long-lived assets. These recoverability
assessments indicated that the book value of certain AeroTurbine intangible assets and leased engines were no longer supported by their future expected cash flows. The resulting impairment was
measured as the excess of the carrying amount of each asset over its fair value. Fair value was estimated based on the present value of future cash flows expected to be generated from the asset,
including its expected residual value, discounted at a rate commensurate with the associated risk. During the year ended December 31, 2015, we also recognized a lower of cost or market
adjustment of $38.7 million related to AeroTurbine's parts inventory. Please refer to Note 22
Other income
.
During
2016, AeroTurbine entered into a letter of intent to sell its storage and maintenance facility located in Goodyear, Arizona, which resulted in a write-down of assets and
associated intangible assets. We also completed a review of AeroTurbine's engine leasing portfolio and identified specific engines for longer-term use and support of AerCap's core aircraft leasing
business, as well as the specific engines to be sold by AeroTurbine to third parties. As a result, we recognized impairments related primarily to older, out-of-production engines. The sale of the
Goodyear operations and the engine portfolio review, together, triggered our decision in the second half of 2016, to accelerate the final phase of the AeroTurbine downsizing. We performed a review of
AeroTurbine's parts inventory, and during 2016, we recognized a lower of cost or market adjustment of $36.0 million based on current available market information. Please refer to
Note 22
Other income
.
During
2017, AeroTurbine completed the sale of its Goodyear operations and the AeroTurbine revolving credit facility was fully repaid and terminated. In addition, AeroTurbine executed an
amendment to the existing lease agreement for its facility in Florida and, as a result, we recognized lease termination fees of $7.6 million.
F-61
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
25. AeroTurbine restructuring (Continued)
We
recorded the following charges in transaction, integration and restructuring related expenses in our Consolidated Income Statements during the years ended December 31, 2017,
2016 and 2015:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Lease termination fees
|
|
$
|
7,645
|
|
|
$
|
|
|
|
$
|
|
|
|
Severance expenses and other
|
|
4,298
|
|
|
19,801
|
|
|
2,072
|
|
|
Leased engines impairment
|
|
2,662
|
|
|
15,392
|
|
|
22,402
|
|
|
Other intangible assets impairment
|
|
|
|
|
14,868
|
|
|
24,837
|
|
|
Write-down of fixed assets and consumable inventory
|
|
|
|
|
3,328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14,605
|
|
|
$
|
53,389
|
|
|
$
|
49,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26. Earnings per share
Basic
EPS is calculated by dividing net income by the weighted average number of our ordinary shares outstanding, which excludes 3,007,752, 3,426,810 and 3,030,724 shares of unvested
restricted stock as of December 31, 2017, 2016 and 2015, respectively. For the calculation of diluted EPS, the weighted average of our ordinary shares outstanding for basic EPS is adjusted by
the effect of dilutive securities, including awards under our equity compensation plans. The number of shares excluded from diluted shares outstanding was 509,677, 152,314 and 36,666 for the years
ended December 31, 2017, 2016 and 2015, respectively, because the effect of including those shares in the calculation would have been anti-dilutive.
The
computations of basic and diluted EPS for the years ended December 31, 2017, 2016 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Net income for the computation of basic EPS
|
|
$
|
1,076,151
|
|
|
$
|
1,046,630
|
|
|
$
|
1,178,730
|
|
|
Weighted average ordinary shares outstandingbasic
|
|
161,059,552
|
|
|
185,514,370
|
|
|
203,850,828
|
|
|
Basic EPS
|
|
$
|
6.68
|
|
|
$
|
5.64
|
|
|
$
|
5.78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
Net income for the computation of diluted EPS
|
|
$
|
1,076,151
|
|
|
$
|
1,046,630
|
|
|
$
|
1,178,730
|
|
|
Weighted average ordinary shares outstandingdiluted
|
|
167,287,508
|
|
|
189,682,036
|
|
|
206,224,135
|
|
|
Diluted EPS
|
|
$
|
6.43
|
|
|
$
|
5.52
|
|
|
$
|
5.72
|
|
|
The
computations of ordinary shares outstanding, excluding shares of unvested restricted stock, as of December 31, 2017, 2016 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
2015
|
|
|
|
Number of ordinary shares
|
|
Ordinary shares issued
|
|
167,847,345
|
|
|
187,847,345
|
|
|
203,411,207
|
|
|
Treasury shares
|
|
(14,855,244
|
)
|
|
(11,600,191
|
)
|
|
(3,069,003
|
)
|
|
|
|
|
|
|
|
|
|
Ordinary shares outstanding
|
|
152,992,101
|
|
|
176,247,154
|
|
|
200,342,204
|
|
|
Shares of unvested restricted stock
|
|
(3,007,752
|
)
|
|
(3,426,810
|
)
|
|
(3,030,724
|
)
|
|
|
|
|
|
|
|
|
|
Ordinary shares outstanding, excluding shares of unvested restricted stock
|
|
149,984,349
|
|
|
172,820,344
|
|
|
197,311,480
|
|
|
|
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F-62
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
27. Variable interest entities
Our leasing and financing activities require us to use many forms of entities to achieve our business objectives and we have participated to varying degrees in the design and formation
of these entities. Our involvement in VIEs varies and includes being a passive investor in the VIE with involvement from other parties, managing and structuring all the VIE's activities, or being the
sole shareholder of the VIE.
During
the year ended December 31, 2017, we did not provide any financial support to any of our VIEs that we were not contractually obligated to provide.
Consolidated VIEs
As of December 31, 2017 and 2016, substantially all assets and liabilities presented in our Consolidated Balance Sheets were held in
consolidated VIEs. The assets of our consolidated VIEs that can only be used to settle obligations of these entities, and the liabilities of these VIEs for which creditors do not have recourse to our
general credit, are disclosed in our Consolidated Balance Sheets under
Supplemental balance sheet information.
Further details of debt held by our
consolidated VIEs are disclosed in Note 15
Debt
.
Wholly-owned ECA and Ex-Im financing vehicles
We have created certain wholly-owned subsidiaries for the purpose of purchasing aircraft and obtaining financing secured by such aircraft. The
secured debt is guaranteed by the European ECAs and the Export-Import Bank of the United States. These entities meet the definition of a VIE because they do not have sufficient equity to operate
without subordinated financial support from us in the form of intercompany notes. We have determined that we are the PB of these entities because we control and manage all aspects of these entities,
including directing the activities that most significantly affect the entities' economic performance, we absorb the majority of the risks and rewards of these entities and we guarantee the activities
of these entities.
Other secured financings
We have created a number of wholly-owned subsidiaries for the purpose of obtaining secured financings. These entities meet the definition of a
VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes. We have determined that we are the PB of these entities
because we control and manage all aspects of these entities, including directing the activities that most significantly affect the entities' economic performance, we absorb the majority of the risks
and rewards of these entities and we guarantee the activities of these entities.
Wholly-owned leasing entities
We have created wholly-owned subsidiaries for the purpose of facilitating aircraft leases with airlines. These entities meet the definition of a
VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes, which serve as equity. We have determined that we are the PB
of these entities because we control and manage all aspects of these entities, including directing the activities that most significantly affect the entities' economic performance, we absorb the
majority of the risks and rewards of these entities and we guarantee the activities of these entities.
F-63
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
27. Variable interest entities (Continued)
Limited recourse financing structures
We have established entities to obtain secured financings for the purchase of aircraft in which we have variable interests. These entities meet
the definition of a VIE because they do not have sufficient equity to operate without subordinated financial support from us in the form of intercompany notes. The loans of these entities are
non-recourse to us except under limited circumstances. We have determined that we are the PB of these entities because we control and manage all aspects of these entities, including directing the
activities that most significantly affect the entities' economic performance, and we absorb the majority of the risks and rewards of these entities.
AerCap Partners I
AerCap Partners I Holding Limited ("AerCap Partners I") is a 50%-50% joint venture owned by us and Deucalion Aviation Funds. We provide lease
management, insurance management and aircraft asset management services to AerCap Partners I for a fee. We have determined that we are the PB of the entity because we direct the activities that most
significantly affect the economic performance of the entity and we absorb a significant portion of the risks and rewards of the entity.
As
of December 31, 2017, AerCap Partners I had a portfolio consisting of seven Boeing 737NG aircraft. As of December 31, 2017, AerCap Partners I had
$59.9 million outstanding under a senior debt facility, which is guaranteed by us, and $63.8 million of subordinated debt outstanding, consisting of $31.9 million from us and
$31.9 million from our joint venture partner.
AerCap Partners II
AerCap Partners 2 Holding Limited ("AerCap Partners II") is a 50%-50% joint venture owned by us and Deucalion Aviation Funds. We provided lease
management, insurance management and aircraft asset management services to AerCap Partners II for a fee. We have determined that we continue to be the PB of the entity because we direct the activities
that most significantly affect the economic performance of the entity and we absorb a significant portion of the risks and rewards of the entity.
As
of December 31, 2017, AerCap Partners II did not own any aircraft. As of December 31, 2017, AerCap Partners II had $16.8 million of subordinated debt outstanding,
consisting of $8.4 million from us and $8.4 million from our joint venture partner. The ECA senior debt facility was repaid in full in December 2017. The $16.8 million of
subordinated debt was repaid in full in February 2018.
AerCap Partners 767
AerCap Partners 767 Limited ("AerCap Partners 767") is a 50%-50% joint venture owned by us and Deucalion Aviation Funds. We provide lease
management, insurance management and aircraft asset management services to AerCap Partners 767 for a fee. We have determined that we are the PB of the entity because we direct the activities that most
significantly affect the economic performance of the entity and we absorb a significant portion of the risks and rewards of the entity.
As
of December 31, 2017, AerCap Partners 767 had a portfolio consisting of two Boeing 767-300ER aircraft. As of December 31, 2017, AerCap Partners 767 had
$11.5 million outstanding under a senior debt facility, which is limited recourse to us and $31.0 million of subordinated debt outstanding, consisting of $15.5 million from us and
$15.5 million from our joint venture partner.
F-64
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
27. Variable interest entities (Continued)
ALS II
The ALS II senior Class A notes were repaid in full in January 2017. Prior to May 31, 2017, we held a 5% equity investment in ALS
II and provided lease management, insurance management and aircraft asset management services to ALS II for a fee. On May 31, 2017, the ALS II structure was unwound and we became owner of 100%
of the equity and we continue to hold 100% of the subordinated fixed rate deferrable interest asset-backed notes ("ALS II Class E-1 Notes") in ALS II. We have determined that we continue to be
the PB of the entity because we continue to direct the activities that most significantly affect the economic performance of the entity and to absorb the majority of the risks and rewards of the
entity.
As
of December 31, 2017, ALS II had a portfolio consisting of 25 Airbus A320 Family aircraft. As of December 31, 2017, ALS II had $350.0 million of senior ALS II
Class E-1 Notes outstanding due to us.
AerFunding
We hold a 5% equity investment and 100% of the subordinated fixed rate deferrable interest asset-backed notes ("AerFunding Class E-1
Notes") in AerFunding. We provide lease management, insurance management and aircraft asset management services to AerFunding for a fee. We have determined that we are the PB of the entity because we
direct the activities that most significantly affect the economic performance of the entity and we absorb the majority of the risks and rewards of the entity.
As
of December 31, 2017, AerFunding had a portfolio consisting of four Airbus A320 Family aircraft, two Airbus A320neo Family aircraft, one Airbus A330 aircraft, one Airbus A350
aircraft, six Boeing 737NG aircraft and four Boeing 787 aircraft. As of December 31, 2017, AerFunding had $878.4 million outstanding under a secured revolving credit facility and
$272.8 million of AerFunding Class E-1 Notes outstanding due to us.
Non-consolidated VIEs
The following table presents our maximum exposure to loss in non-consolidated VIEs as of December 31, 2017 and 2016:
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|
|
|
As of December 31,
|
|
|
|
2017
|
|
2016
|
|
Carrying value of investments (Note 11)
|
|
$
|
122,946
|
|
|
$
|
118,783
|
|
|
Debt guarantees
|
|
104,867
|
|
|
125,429
|
|
|
|
|
|
|
|
|
Maximum exposure to loss
|
|
$
|
227,813
|
|
|
$
|
244,212
|
|
|
|
|
|
|
|
|
|
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The
maximum exposure to loss represents the amount that would be absorbed by us in the event that all of our assets held in the VIEs, for which we are not the PB, had no value and
outstanding debt guarantees were called upon in full.
F-65
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
27. Variable interest entities (Continued)
AerDragon
AerDragon is a joint venture with 50% owned by China Aviation Supplies Holding Company and the other 50% owned equally by us, affiliates of
Crédit Agricole Corporate and Investment Bank, and East Epoch Limited. This joint venture enhances our presence in the Chinese market and our ability to lease our aircraft and engines
throughout the entire Asia/Pacific region. We provide accounting related services to AerDragon, and guaranteed debt previously secured by certain aircraft which AerDragon purchased directly from us
for a fee. As of December 31, 2017 and 2016, we guaranteed debt of nil and $3.4 million, respectively, for AerDragon. The guaranteed debt was repaid in full in August 2017, and therefore
the obligations of AerDragon are non-recourse to us.
As
of December 31, 2017, AerDragon had 29 narrowbody aircraft on lease to ten airlines.
We
have determined that AerDragon is a VIE, in which we do not have control and therefore we are not the PB. We do have significant influence and, accordingly, we account for our
investment in AerDragon under the equity method of accounting.
AerLift
AerLift is a joint venture in which we have a 39% interest. We provide asset and lease management, insurance management and cash management
services to AerLift for a fee. As of December 31, 2017 and 2016, we guaranteed debt of $104.9 million and $122.0 million, respectively, for AerLift. Other than the debt for which
we act as a guarantor, the debt obligations of AerLift are non-recourse to us.
As
of December 31, 2017, AerLift owned four widebody aircraft.
We
have determined that AerLift is a VIE in which we do not have control and therefore we are not the PB. We do have significant influence and, accordingly, we account for our investment
in AerLift under the equity method of accounting.
ACSAL
In June 2013, we completed a transaction under which we sold eight Boeing 737-800 aircraft to ACSAL, an affiliate of Guggenheim, in exchange for
cash, and we made a capital contribution to ACSAL in exchange for 19% of its equity. We provide aircraft asset and lease management services to ACSAL for a fee. As of December 31, 2017, ACSAL
continued to own the eight aircraft.
We
have determined that ACSAL is a VIE in which we do not have control and therefore we are not the PB. We do have significant influence and, accordingly, we account for our investment
in ACSAL under the equity method of accounting.
Peregrine
In December 2017, we invested in Peregrine, a vehicle established by NCB Capital for the purpose of acquiring a portfolio of 21 aircraft from
us. We will have a 9.5% investment in Peregrine. We provide asset and lease management, insurance management, accounting and cash management services to Peregrine for a fee.
As
of December 31, 2017, Peregrine had completed the acquisition of four of the 21 aircraft. The 17 remaining aircraft are expected to be acquired during early 2018.
F-66
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
27. Variable interest entities (Continued)
We
have determined that Peregrine is a VIE in which we do not have control and therefore we are not the PB. We account for our investment in Peregrine under the cost method of
accounting.
Other variable interest entities
We have variable interests in other entities in which we have determined we are not the PB because we do not have the power to direct the
activities that most significantly affect the entities' economic performance. Our variable interest in these entities consists of servicing fees that we receive for providing aircraft management
services.
28. Related party transactions
AerDragon
We
provide accounting related services to, and guaranteed debt of AerDragon. We charged AerDragon a fee for these services of $0.5 million, $0.6 million and
$0.5 million during the years ended December 31, 2017, 2016 and 2015, respectively. In addition, we received a dividend of $3.3 million, $1.7 million and
$0.3 million from AerDragon during the years ended December 31, 2017, 2016 and 2015, respectively.
ACSAL
We
provide aircraft asset and lease management services to ACSAL, for which we received a fee of $0.5 million, $0.5 million and $0.5 million for the years ended
December 31, 2017, 2016 and 2015, respectively. In addition, we received a dividend of $1.9 million, nil and nil from ACSAL during the years ended December 31, 2017, 2016 and
2015, respectively.
AerLift
We
provide a variety of management services to, and guarantee certain debt of, AerLift, for which we received a fee of $1.8 million, $2.9 million and $2.8 million
during the years ended December 31, 2017, 2016 and 2015, respectively. In addition, we received dividends of $3.0 million, $7.5 million and $2.3 million from AerLift during
the years ended December 31, 2017, 2016 and 2015, respectively.
F-68
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies
Aircraft on order
As
of December 31, 2017, we had commitments to purchase 438 new aircraft scheduled for delivery through 2024. These commitments are based upon purchase agreements with Boeing,
Airbus and Embraer. These agreements establish the pricing formulas (including adjustments for certain contractual escalation provisions) and various other terms with respect to the purchase of
aircraft. Under certain circumstances, we have the right to alter the mix of aircraft types ultimately acquired. As of December 31, 2017, we had made non-refundable deposits on these purchase
commitments (exclusive of capitalized interest and fair value adjustments) of approximately $899.5 million, $718.0 million and $13.5 million with Boeing, Airbus and Embraer,
respectively.
Management
anticipates that a portion of the aggregate purchase price for the acquisition of aircraft will be funded by incurring additional debt. The amount of the indebtedness to be
incurred will depend on the final purchase price of the aircraft, which can vary due to a number of factors, including inflation.
Movements
in prepayments on flight equipment during the years ended December 31, 2017 and 2016 were as follows:
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|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2017
|
|
2016
|
|
Prepayments on flight equipment at beginning of period
|
|
$
|
3,265,979
|
|
|
$
|
3,300,426
|
|
|
Prepayments made during the period
|
|
1,162,884
|
|
|
837,776
|
|
|
Interest paid and capitalized during the period
|
|
107,364
|
|
|
107,688
|
|
|
Prepayments and capitalized interest applied to the purchase of flight equipment
|
|
(1,605,924
|
)
|
|
(979,911
|
)
|
|
|
|
|
|
|
|
Prepayments on flight equipment at end of period
|
|
$
|
2,930,303
|
|
|
$
|
3,265,979
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
The
following table presents our contractual commitments for the purchase of flight equipment as of December 31, 2017:
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|
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|
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|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
|
Purchase obligations (a)
|
|
$
|
6,065,084
|
|
|
$
|
5,723,097
|
|
|
$
|
4,742,181
|
|
|
$
|
3,714,523
|
|
|
$
|
2,405,676
|
|
|
$
|
1,662,286
|
|
|
$
|
24,312,847
|
|
|
-
(a)
-
Includes
commitments to purchase 426 aircraft and 12 purchase and leaseback transactions.
F-69
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies (Continued)
Leases
We
have operating lease agreements with third parties for office space, company cars and office equipment. As of December 31, 2017, minimum payments under the lease agreements for
office space were as follows:
|
|
|
|
|
|
|
|
Future minimum
lease payments
|
|
2018
|
|
$
|
10,211
|
|
|
2019
|
|
7,692
|
|
|
2020
|
|
7,593
|
|
|
2021
|
|
7,670
|
|
|
2022
|
|
7,750
|
|
|
Thereafter
|
|
44,388
|
|
|
|
|
|
|
|
|
$
|
85,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset value guarantees
We
have potential obligations under contracts that guarantee a portion of the residual value of aircraft owned by third parties. These guarantees expire at various dates through 2023 and
generally obligate us to pay the shortfall between the fair market value and the guaranteed value of the aircraft and, in certain cases, provide us with an option to purchase the aircraft for the
guaranteed value. During 2017, we settled one asset value guarantee and, as a result, we recognized a $3.2 million gain in other income. Additionally, one asset value guarantee was exercised
and two asset value guarantees expired unexercised. As of December 31, 2017, four guarantees were outstanding.
We
regularly review the underlying values of the aircraft collateral to determine our exposure under these asset value guarantees. We did not record any asset value guarantee loss
provisions during the years ended December 31, 2017 or 2016.
As
of December 31, 2017 and 2016, the carrying value of the asset value guarantee liability was nil and $37.5 million, respectively, and was included in accounts payable,
accrued expenses and other liabilities in our Consolidated Balance Sheets. As of December 31, 2017, the maximum aggregate potential commitment that we were obligated to pay under these
guarantees, without any offset for the projected value of the aircraft or other contractual features that may limit our exposure, was approximately $66.5 million.
Other guarantees
We
previously guaranteed the future re-lease or extension rental rates and other costs of four sold aircraft, up to agreed maximum amounts for each aircraft. During 2017, all four of
these guarantees were settled. As of December 31, 2017 and 2016, the carrying value of these guarantees was nil and $11.4 million, respectively, and was included in accounts payable,
accrued expenses and other liabilities in our Consolidated Balance Sheets. Subsequent to the settlement, we have no further exposure to these guarantees.
F-70
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies (Continued)
We
guarantee the replacement lease rental cash flows of sold aircraft, in the event of a default and lease termination by the current lessees, up to agreed maximum amounts for each
aircraft. These guarantees expire in 2020. We are obligated to perform under these guarantees in the event of a default and lease termination by the current lessees, and if the contracted net
replacement lease rental rates do not equal or exceed the rental amounts in the current lease contracts. During 2017, we settled one of these guarantees. As of December 31, 2017, two of these
guarantees were outstanding. As of December 31, 2017 and 2016, the carrying value of these guarantees was $2.3 million and $2.9 million, respectively, and was included in accounts
payable, accrued expenses and other liabilities in our Consolidated Balance Sheets. As of December 31, 2017, the maximum undiscounted aggregate future guarantee payments that we could be
obligated to make under these guarantees, without offset for the projected net future re-lease or extension rates, were approximately $10.5 million.
Legal proceedings
General
In
the ordinary course of our business, we are a party to various legal actions, which we believe are incidental to the operations of our business. The Company regularly reviews the
possible outcome of such legal actions, and accrues for such legal actions at the time a loss is probable and the amount of the loss can be estimated. In addition, the Company also reviews indemnities
and insurance coverage, where applicable. Based on information currently available, we believe the potential outcome of those cases where we are able to estimate reasonably possible losses, and our
estimate of the reasonably possible losses exceeding amounts already recognized, on an aggregated basis, is immaterial to our Consolidated Financial Statements.
VASP litigation
We
leased 13 aircraft and three spare engines to Viação Aerea de São Paulo ("VASP"), a Brazilian airline. In 1992, VASP defaulted on its
lease obligations and we commenced litigation against VASP to repossess our equipment. In 1992, we obtained a preliminary injunction for the repossession and export of 13 aircraft and three spare
engines from VASP. We repossessed and exported the aircraft and engines in 1992. VASP appealed this decision. In 1996, the Appellate Court of the State of São Paulo ("TJSP") ruled in
favor of VASP on its appeal. We were instructed to return the aircraft and engines to VASP for lease under the terms of the original lease agreements. The Appellate Court also granted VASP the right
to seek damages in lieu of the return of the aircraft and engines. Since 1996 we have defended this case in the Brazilian courts through various motions and appeals. On March 1, 2006, the
Superior Tribunal of Justice (the "STJ") dismissed our then-pending appeal and on April 5, 2006, a special panel of the STJ confirmed this decision. On May 15, 2006 we filed an
extraordinary appeal with the Federal Supreme Court. In September 2009 the Federal Supreme Court requested an opinion on our appeal from the office of the Attorney General. This opinion was provided
in October 2009. The Attorney General recommended that AerCap's extraordinary appeal be accepted for trial and that the case be subject to a new judgment before the STJ. The Federal Supreme Court is
not bound by the opinion of the Attorney General. While we have been advised that it would be normal practice to take such an opinion into consideration, there are no assurances that the Federal
Supreme Court will rule in accordance with the Attorney General opinion or, if it did, what the outcome of the judgment of the STJ would be.
F-71
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies (Continued)
On
February 23, 2006, VASP commenced a procedure to calculate its alleged damages and since then we, VASP and the court have appointed experts to assist the court in calculating
damages. Our appointed expert has concluded that no damages were incurred. The VASP-appointed expert has concluded that substantial damages were incurred, and has claimed that such damages should
reflect monetary adjustments and default interest for the passage of time. The court-appointed expert has also concluded that no damages were incurred. Different public prosecutors have issued
conflicting opinions. The first public prosecutor had filed an opinion that supports the view of the VASP-appointed expert. In response to that opinion, the court-appointed expert reaffirmed his
conclusion. A subsequently-appointed public prosecutor subsequently filed a new opinion that is less supportive of the VASP-appointed expert's opinion, but the original public prosecutor then issued a
third opinion consistent with the first one. On October 30, 2017, the court decided that VASP had suffered no damages. VASP has certain rights of appeal and review of the decision. We believe,
however, and we have been advised, that it is not probable that VASP will ultimately be able to recover damages from us even if VASP prevails on the issue of liability. The outcome of the legal
process is, however, uncertain. The ultimate amount of damages, if any, payable to VASP cannot reasonably be estimated at this time. We continue to actively pursue all courses of action that may
reasonably be available to us and intend to defend our position vigorously.
In
July 2006, we brought a claim for damages against VASP in the English courts, seeking damages incurred by AerCap as a result of VASP's default under seven leases that were governed by
English law. VASP filed applications challenging the jurisdiction of the English court, and sought to adjourn the jurisdictional challenge pending the sale of some of its assets in Brazil. We opposed
this application and by an order dated March 6, 2008, the English court dismissed VASP's applications.
In
September 2008, the bankruptcy court in Brazil ordered the bankruptcy of VASP. VASP appealed this decision. In December 2008, we filed with the English court an application for
default judgment, seeking damages plus accrued interest pursuant to seven lease agreements. On March 16, 2009, we obtained a default judgment in which we were awarded approximately
$40 million in damages plus accrued interest. We subsequently applied to the STJ for an order ratifying the English judgment, so that it might be submitted in the VASP bankruptcy. The STJ
granted AerCap's application and entered an order ratifying the English judgment. Although VASP appealed that order, it is fully effective pending a resolution of VASP's appeal of the order ratifying
the English judgment.
In
addition to our claim in the English courts, AerCap has also brought actions against VASP in the Irish courts to recover damages incurred as a result of VASP's default under nine
leases governed by Irish law. The Irish courts granted an order for service of process, and although VASP opposed service in Brazil, the STJ ruled that service of process had been properly completed.
After some additional delay due to procedural issues related to VASP's bankruptcy, the Irish action went forward. Upon VASP's failure to appear, the High Court entered default judgment in favor of
AerCap, finding VASP liable for breach of its obligations under the leases. On October 24, 2014, the High Court entered two judgments in favor of AerCap, awarding us aggregate damages in the
amount of approximately $36.9 million. We subsequently applied to the STJ for an order ratifying the Irish judgments, so that they might be submitted in the VASP bankruptcy. The STJ granted
AerCap's application and ratified the Irish judgments.
AerCap
has submitted both the Irish and the English judgments in the VASP bankruptcy; the bankruptcy court has required that the claims submitted limit interest on the judgments to that
accrued on or before the commencement of VASP's bankruptcy, which has resulted in claims of approximately $40 million for the English judgments and approximately $24 million for the
Irish judgments.
F-72
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies (Continued)
On
November 6, 2012, the STJ ruled in favor of VASP on its appeal from the order placing it in bankruptcy. Acting alone, the reporting justice of the appellate panel ordered the
bankruptcy revoked and the matter converted to a judicial reorganization. Several creditors of VASP appealed that ruling to the full panel of the STJ. On December 17, 2012, the Special Court of
the STJ reversed the ruling of the reporting justice and upheld the order placing VASP in bankruptcy. The decision was published on February 1, 2013. On February 25, 2013, the lapse of
time for appeal (res judicata) was certified.
Transbrasil litigation
In
the early 1990s, two AerCap-related companies (the "AerCap Lessors") leased an aircraft and two engines to Transbrasil S/A Linhas Areas ("Transbrasil"), a now-defunct Brazilian
airline. By 1998, Transbrasil had defaulted on various obligations under its leases with AerCap, along with other leases it had entered into with GECC and certain of its affiliates (collectively with
GECC, the "GE Lessors"). GECAS was the servicer for all these leases at the time. Subsequently, Transbrasil issued promissory notes (the "Notes") to the AerCap lessors and GE Lessors (collectively the
"Lessors") in connection with restructurings of the leases. Transbrasil defaulted on the Notes and GECC brought an enforcement action on behalf of the Lessors in 2001. Concurrently, GECC filed an
action for the involuntary bankruptcy of Transbrasil.
Transbrasil
brought a lawsuit against the Lessors in February 2001 (the "Transbrasil Lawsuit"), claiming that the Notes had in fact been paid at the time GECC brought the enforcement
action. In 2007, the trial judge ruled in favor of Transbrasil. That decision was appealed. In April 2010, the appellate court published a judgment (the "2010 Judgment") rejecting the Lessors' appeal,
ordering them to pay Transbrasil statutory penalties equal to double the face amount of the Notes (plus interest and monetary adjustments) as well as damages for any losses incurred as a result of the
attempts to collect on the Notes. The 2010 Judgment provided that the amount of such losses would be calculated in separate proceedings in the trial court (the "Indemnity Claim"). In June 2010, the
AerCap Lessors and GE Lessors separately filed special appeals before the STJ in Brazil. These special appeals were subsequently admitted for hearing.
In
July 2011, Transbrasil brought three actions for provisional enforcement of the 2010 Judgment (the "Provisional Enforcement Actions"): one to enforce the award of statutory penalties;
a second to recover attorneys' fees related to that award, and a third to enforce the Indemnity Claim. Transbrasil submitted its alleged calculation of statutory penalties, which, according to
Transbrasil, amounted to approximately $210 million in the aggregate against all defendants, including interest and monetary adjustments. AerCap and its co-defendants opposed provisional
enforcement of the 2010 judgment, arguing, among other things, that Transbrasil's calculations were greatly exaggerated.
Transbrasil
also initiated proceedings to determine the amount of its alleged Indemnity Claim. The court appointed an expert to determine the measure of damages and the defendants
appointed an assistant expert. We believe we have strong arguments to convince the expert and the court that Transbrasil suffered no damage as a result of the defendants' attempts to collect on the
Notes.
F-73
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
29. Commitments and contingencies (Continued)
In
February 2012, AerCap brought a civil complaint against GECAS and GECC in the State of New York (the "New York Action"), alleging, among other things, that GECAS and GECC had violated
certain duties to AerCap in connection with their attempts to enforce the Notes and their defense of Transbrasil's lawsuit. In November 2012, AerCap, GECAS, and the GE Lessors entered into a
settlement agreement resolving all of the claims raised in the New York Action. The terms of the settlement agreement are confidential.
In
October 2013, the STJ granted the special appeals filed by GECAS and its related parties, effectively reversing the 2010 Judgment in most respects as to all of the Lessors.
In
February 2014, Transbrasil appealed the STJ's ruling of October 2013 to another panel of the STJ. The appellate panel rejected Transbrasil's appeal in November 2016, preserving the
October 2013 order. The parties have the right to seek further appellate review of the appellate panel's November 2016 order.
In
light of the STJ's ruling of October 2013, the trial court has ordered the dismissal of two of Transbrasil's Provisional Enforcement Actionsthose seeking statutory
penalties and attorneys' fees. The TJSP has since affirmed the dismissals of those actions and Transbrasil has appealed that order. Transbrasil's Provisional Enforcement Action with respect to the
Indemnity Claim remains pending; however, the action has currently been stayed pending a final decision in the Transbrasil Lawsuit.
Yemen Airways-Yemenia litigation
ILFC
is named in a lawsuit in connection with the 2009 crash of an Airbus A310-300 aircraft owned by ILFC and on lease to Yemen Airways-Yemenia, a Yemeni carrier ("Hassanati Action").
The Hassanati plaintiffs are families of deceased occupants of the flight and seek unspecified damages for wrongful death, costs, and fees. The Hassanati Action commenced in January 2011 and was
pending in the United States District Court for the Central District of California. On February 18, 2014, the district court granted summary judgment in ILFC's favor and dismissed all of the
Hassanati plaintiffs' remaining claims. The Hassanati plaintiffs appealed. On March 22, 2016, the appellate court rejected the appeal. On April 22, 2016, the Hassanati plaintiffs refiled
their action at the trial court. The trial court granted ILFC's motion to dismiss the Hassanati plaintiffs' second complaint on November 22, 2016. The Hassanati plaintiffs have appealed this
order. On August 29, 2014, a new group of plaintiffs filed a lawsuit against ILFC in the United States District Court for the Central District of California (the "Abdallah Action"). The
Abdallah Action claims unspecified damages from ILFC on the same theory as does the Hassanati Action. On June 30, 2017, the parties to the Abdallah action executed a Master Settlement Agreement
setting forth terms on which Yemenia's insurance carrier proposes to settle the case with each claimant family. Upon the claimant families' execution of individual release and discharge agreements and
upon ILFC's and Yemenia's confirmation of a sufficient number of participating claimants, the claims by such participating claimants against ILFC and Yemenia in the Abdallah Action will be dismissed
in exchange for payment from Yemenia's insurance carrier. We believe that ILFC has substantial defenses on the merits and is adequately covered by available liability insurance in respect of both the
Hassanati Action and the Abdallah Action.
F-74
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
30. Fair value measurements
The
Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. It is our policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value
hierarchy as described below. Where limited or no observable market data exists, fair value measurements for assets and liabilities are primarily based on management's own estimates and are calculated
based upon the economic and competitive environment, the characteristics of the asset or liability and other such factors. Therefore, the results may not be realized in actual sale or immediate
settlement of the asset or liability.
The
degree of judgment used in measuring the fair value of a financial and non-financial asset or liability generally correlates with the level of pricing observability. We classify our
fair value measurements based on the observability and significance of the inputs used in making the measurement, as provided below:
Level 1Quoted
prices available in active markets for identical assets or liabilities as of the reported date.
Level 2Observable
market data. Inputs include quoted prices for similar assets, liabilities (risk adjusted) and market-corroborated inputs, such as market
comparables, interest rates, yield curves and other items that allow value to be determined.
Level 3Unobservable
inputs from our own assumptions about market risk developed based on the best information available, subject to cost benefit analysis. Inputs may
include our own data.
Fair
value measurements are classified in their entirety based on the lowest level of input that is significant to their fair value measurement.
Assets and liabilities measured at fair value on a recurring basis
As
of December 31, 2017 and 2016, our derivative portfolio consisted of interest rate swaps and caps. The fair value of derivatives is based on dealer quotes for identical
instruments. We have also considered the credit rating and risk of the counterparty of the derivative contract based on quantitative and qualitative factors. As such, the valuation of these
instruments was classified as Level 2.
The
following tables present our financial assets and liabilities that we measured at fair value on a recurring basis by level within the fair value hierarchy as of December 31,
2017 and 2016:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
$
|
48,896
|
|
|
$
|
|
|
|
$
|
48,896
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
$
|
37,187
|
|
|
$
|
|
|
|
$
|
37,187
|
|
|
$
|
|
|
|
F-75
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
30. Fair value measurements (Continued)
Assets and liabilities measured at fair value on a non-recurring basis
We
measure the fair value of certain definite-lived intangible assets and our flight equipment on a non-recurring basis, when U.S. GAAP requires the application of fair value,
including when events or changes in circumstances indicate that the carrying amounts of the assets may not be recoverable.
Management
develops the assumptions used in the fair value measurements. Therefore, the fair value measurements of definite-lived intangible assets and flight equipment are classified as
Level 3 valuations.
Definite-lived intangible assets
We
use the income approach to measure the fair value of definite-lived intangible assets, which is based on the present value of estimated future cash flows to be generated from the
asset.
We
impaired certain definite-lived intangible assets to fair value during the years ended December 31, 2016 and 2015 as the carrying value of these assets was not expected to be
recoverable based on the revised cash flow estimates. Please refer to Note 25
AeroTurbine restructuring
for further details.
Flight equipment
Inputs to non-recurring fair value measurements categorized as Level 3
We
use the income approach to measure the fair value of flight equipment, which is based on the present value of estimated future cash flows. Key inputs to the estimated future cash
flows for flight equipment include current contractual lease cash flows, projected future non-contractual lease or sale cash flows, extended to the end of the aircraft's estimated holding period in
its highest and best use, and a contractual or estimated disposition value.
The
current contractual lease cash flows are based on the in-force lease rates. The projected future non-contractual lease cash flows are estimated based on the aircraft type, age, and
the airframe and engine configuration of the aircraft. The projected non-contractual lease cash flows are applied to follow-on lease terms, which are estimated based on the age of the aircraft at the
time of re-lease and are assumed through the estimated holding period of the aircraft. The estimated holding period is the period over which future cash flows are assumed to be generated. Shorter
holding periods can result when a potential sale or future part-out of an individual aircraft has been contracted for, or is likely. In instances of a potential sale or part-out, the holding period is
based on the estimated sale or part-out date. The disposition value is generally estimated based on aircraft type. In situations where the aircraft will be disposed of, the disposition value assumed
is based on an estimated part-out value or the contracted sale price.
The
estimated future cash flows, as described above, are then discounted to present value. The discount rate used is based on the aircraft type and incorporates assumptions market
participants would use regarding the market attractiveness of the aircraft type, the likely debt and equity financing components, and the required returns of those financing components.
F-76
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
30. Fair value measurements (Continued)
For
flight equipment that we measured at fair value on a non-recurring basis during the year ended December 31, 2017, the following table presents the fair value of such flight
equipment as of the measurement date, the valuation technique and the related unobservable inputs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value
|
|
Valuation technique
|
|
Unobservable input
|
|
Range
|
|
Weighted
average
|
Flight equipment
|
|
$
|
355,923
|
|
|
Income approach
|
|
Discount rate
|
|
0% - 10%
|
|
5%
|
|
|
|
|
|
|
|
Remaining holding period
|
|
0 - 13 years
|
|
8 years
|
|
|
|
|
|
|
|
Non-contractual cash flows
|
|
0% - 100%
|
|
38%
|
During
the year ended December 31, 2017, we recognized impairment charges of $61.3 million on 13 aircraft and two engines. The impairment charges primarily related to lease
terminations for six aircraft and one engine. These impairments were more than offset by lease revenue that we recognized when we retained maintenance-related balances or received EOL compensation. In
addition, we recognized impairment charges for seven aircraft and one engine that were part of sale transactions. These impairments were partially offset by lease revenue that we recognized when we
retained maintenance-related balances.
Sensitivity to changes in unobservable inputs
When
estimating the fair value measurement of flight equipment, we consider the effect of a change in a particular assumption independently of changes in any other assumptions. In
practice, simultaneous changes in assumptions may not always have a linear effect on inputs.
The
significant unobservable inputs utilized in the fair value measurement of flight equipment are the discount rate, the remaining estimated holding period and the non-contractual cash
flows. The discount rate is affected by movements in the aircraft funding markets, including fluctuations in required rates of return in debt and equity, and loan to value ratios. The remaining
estimated holding period and non-contractual cash flows represent management's estimate of the remaining service period of an aircraft and the estimated non-contractual cash flows over the remaining
life of the aircraft. An increase in the discount rate would decrease the fair value measurement of the aircraft, while an increase in the remaining estimated holding period or the estimated
non-contractual cash flows would increase the fair value measurement of the aircraft.
Fair value disclosures of financial instruments
The
fair value of restricted cash and cash and cash equivalents approximates their carrying value because of their short-term nature (Level 1). The fair value of notes receivables
approximates its carrying value (Level 2). The fair value of our long-term unsecured debt is estimated using quoted market prices for similar or identical instruments, depending on the
frequency and volume of activity in the market. The fair value of our long-term secured debt is estimated using a discounted cash flow analysis based on current market interest rates and spreads for
debt with similar characteristics (Level 2). Derivatives are recognized in our Consolidated Balance Sheets at their fair value. The fair value of derivatives is based on dealer quotes for
identical instruments. We have also considered the credit rating and risk of the counterparties of the derivative contracts based on quantitative and qualitative factors (Level 2). The fair
value of guarantees is determined by reference to the fair market value or future lease cash flows of the underlying aircraft and the guaranteed amount (Level 3).
F-77
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
30. Fair value measurements (Continued)
The
carrying amounts and fair values of our most significant financial instruments as of December 31, 2017 and 2016 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
Carrying value
|
|
Fair value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,659,669
|
|
|
$
|
1,659,669
|
|
|
$
|
1,659,669
|
|
|
$
|
|
|
|
$
|
|
|
|
Restricted cash
|
|
364,456
|
|
|
364,456
|
|
|
364,456
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
48,896
|
|
|
48,896
|
|
|
|
|
|
48,896
|
|
|
|
|
|
Notes receivables
|
|
22,497
|
|
|
22,497
|
|
|
|
|
|
22,497
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,095,518
|
|
|
$
|
2,095,518
|
|
|
$
|
2,024,125
|
|
|
$
|
71,393
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
28,580,800
|
(a)
|
|
$
|
29,074,375
|
|
|
$
|
|
|
|
$
|
29,074,375
|
|
|
$
|
|
|
|
Guarantees
|
|
2,272
|
|
|
2,272
|
|
|
|
|
|
|
|
|
2,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,583,072
|
|
|
$
|
29,076,647
|
|
|
$
|
|
|
|
$
|
29,074,375
|
|
|
$
|
2,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Excludes
debt issuance costs and debt discounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
Carrying value
|
|
Fair value
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
2,035,447
|
|
|
$
|
2,035,447
|
|
|
$
|
2,035,447
|
|
|
$
|
|
|
|
$
|
|
|
|
Restricted cash
|
|
329,180
|
|
|
329,180
|
|
|
329,180
|
|
|
|
|
|
|
|
|
Derivative assets
|
|
37,187
|
|
|
37,187
|
|
|
|
|
|
37,187
|
|
|
|
|
|
Notes receivables
|
|
23,359
|
|
|
23,359
|
|
|
|
|
|
23,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,425,173
|
|
|
$
|
2,425,173
|
|
|
$
|
2,364,627
|
|
|
$
|
60,546
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
27,873,900
|
(a)
|
|
$
|
28,203,635
|
|
|
$
|
|
|
|
$
|
28,203,635
|
|
|
$
|
|
|
|
Guarantees
|
|
51,804
|
|
|
51,804
|
|
|
|
|
|
|
|
|
51,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,925,704
|
|
|
$
|
28,255,439
|
|
|
$
|
|
|
|
$
|
28,203,635
|
|
|
$
|
51,804
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Excludes
debt issuance costs and debt discounts.
F-78
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information
The following supplemental financial information is presented to comply with Rule 3-10 of Regulation S-X.
AerCap Aviation Notes
In May 2012, AerCap Aviation Solutions B.V. ("AerCap Aviation Solutions"), a 100%-owned finance subsidiary of AerCap Holdings N.V.
(the "Parent Guarantor"), issued $300.0 million of 6.375% senior unsecured notes due 2017 (the "AerCap Aviation Notes"). The AerCap Aviation Notes were fully and unconditionally guaranteed by
the Parent Guarantor. In May 2017 we repaid the AerCap Aviation Notes in full.
AGAT/AICDC Notes
From time to time since the completion of the ILFC Transaction, AerCap Trust and AICDC have co-issued additional senior unsecured notes. The
proceeds from these offerings have been used for general corporate purposes. Please refer to Note 15
Debt
for further details on the
AGAT/AICDC Notes.
The
AGAT/AICDC Notes are jointly and severally and fully and unconditionally guaranteed by the Parent Guarantor and by AerCap Ireland Limited, AerCap Aviation Solutions, ILFC and AerCap
U.S. Global Aviation LLC (together, the "Subsidiary Guarantors").
The
following condensed consolidating financial information presents the Condensed Consolidating Balance Sheets as of December 31, 2017 and 2016, the Condensed Consolidating
Income Statements, Condensed Consolidating Statements of Cash Flows and Condensed Consolidating Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015 of
(i)
the Parent Guarantor;
(ii)
AerCap Trust;
(iii)
AICDC;
(iv)
the Subsidiary
Guarantors on a combined basis;
(v)
the non-guarantor subsidiaries on a combined basis;
(vi)
elimination entries necessary
to consolidate the Parent Guarantor with AerCap Trust and AICDC, the Subsidiary Guarantors and the non-guarantor subsidiaries; and
(vii)
the
Company on a consolidated basis. Investments in consolidated subsidiaries are presented under the equity method of accounting. A portion of our cash and cash equivalents is held by subsidiaries and
access to such cash by us for group purposes is limited.
In
accordance with Rule 3-10 of Regulation S-X, separate financial statements and other disclosures with respect to AerCap Trust, AICDC and the Subsidiary Guarantors have
not been provided, as AerCap Trust, AICDC and the Subsidiary Guarantors are 100%-owned by the Parent Guarantor, all guarantees of the AGAT/AICDC Notes are joint and several and full and unconditional
and the Parent Guarantor's financial statements have been filed in this annual report for the periods specified by Rules 3-01 and 3-02 of Regulation S-X.
F-79
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21
|
|
|
$
|
222
|
|
|
$
|
14
|
|
|
$
|
1,227
|
|
|
$
|
176
|
|
|
$
|
|
|
|
$
|
1,660
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
10
|
|
|
354
|
|
|
|
|
|
364
|
|
|
Flight equipment held for operating leases, net
|
|
|
|
|
10,461
|
|
|
|
|
|
1,959
|
|
|
19,977
|
|
|
|
|
|
32,397
|
|
|
Maintenance rights intangible and lease premium, net
|
|
|
|
|
758
|
|
|
|
|
|
35
|
|
|
709
|
|
|
|
|
|
1,502
|
|
|
Flight equipment held for sale
|
|
|
|
|
168
|
|
|
|
|
|
|
|
|
463
|
|
|
|
|
|
631
|
|
|
Net investment in finance and sales-type leases
|
|
|
|
|
520
|
|
|
|
|
|
193
|
|
|
283
|
|
|
|
|
|
996
|
|
|
Prepayments on flight equipment
|
|
|
|
|
2,340
|
|
|
|
|
|
4
|
|
|
586
|
|
|
|
|
|
2,930
|
|
|
Investments including investments in subsidiaries
|
|
9,632
|
|
|
1,066
|
|
|
8,037
|
|
|
5,670
|
|
|
122
|
|
|
(24,405
|
)
|
|
122
|
|
|
Intercompany receivables
|
|
128
|
|
|
14,495
|
|
|
80
|
|
|
9,989
|
|
|
5,281
|
|
|
(29,973
|
)
|
|
|
|
|
Other assets
|
|
96
|
|
|
603
|
|
|
85
|
|
|
366
|
|
|
288
|
|
|
|
|
|
1,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,877
|
|
|
$
|
30,633
|
|
|
$
|
8,216
|
|
|
$
|
19,453
|
|
|
$
|
28,239
|
|
|
$
|
(54,378
|
)
|
|
$
|
42,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
|
|
|
$
|
17,098
|
|
|
$
|
398
|
|
|
$
|
24
|
|
|
$
|
10,901
|
|
|
$
|
|
|
|
$
|
28,421
|
|
|
Intercompany payables
|
|
1,276
|
|
|
3,527
|
|
|
4,875
|
|
|
9,202
|
|
|
11,093
|
|
|
(29,973
|
)
|
|
|
|
|
Other liabilities
|
|
22
|
|
|
1,950
|
|
|
|
|
|
471
|
|
|
2,537
|
|
|
|
|
|
4,980
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,298
|
|
|
22,575
|
|
|
5,273
|
|
|
9,697
|
|
|
24,531
|
|
|
(29,973
|
)
|
|
33,401
|
|
|
Total AerCap Holdings N.V. shareholders
'
equity
|
|
8,579
|
|
|
8,058
|
|
|
2,943
|
|
|
9,684
|
|
|
3,721
|
|
|
(24,405
|
)
|
|
8,580
|
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
72
|
|
|
(13
|
)
|
|
|
|
|
59
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
8,579
|
|
|
8,058
|
|
|
2,943
|
|
|
9,756
|
|
|
3,708
|
|
|
(24,405
|
)
|
|
8,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
9,877
|
|
|
$
|
30,633
|
|
|
$
|
8,216
|
|
|
$
|
19,453
|
|
|
$
|
28,239
|
|
|
$
|
(54,378
|
)
|
|
$
|
42,040
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-80
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4
|
|
|
$
|
829
|
|
|
$
|
64
|
|
|
$
|
931
|
|
|
$
|
207
|
|
|
$
|
|
|
|
$
|
2,035
|
|
|
Restricted cash
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
320
|
|
|
|
|
|
329
|
|
|
Flight equipment held for operating leases, net
|
|
|
|
|
11,012
|
|
|
|
|
|
1,299
|
|
|
19,191
|
|
|
|
|
|
31,502
|
|
|
Maintenance rights intangible and lease premium, net
|
|
|
|
|
1,190
|
|
|
|
|
|
52
|
|
|
926
|
|
|
|
|
|
2,168
|
|
|
Flight equipment held for sale
|
|
|
|
|
28
|
|
|
|
|
|
|
|
|
79
|
|
|
|
|
|
107
|
|
|
Net investment in finance and sales-type leases
|
|
|
|
|
437
|
|
|
|
|
|
166
|
|
|
154
|
|
|
|
|
|
757
|
|
|
Prepayments on flight equipment
|
|
|
|
|
3,006
|
|
|
|
|
|
5
|
|
|
255
|
|
|
|
|
|
3,266
|
|
|
Investments including investments in subsidiaries
|
|
9,310
|
|
|
874
|
|
|
7,249
|
|
|
4,941
|
|
|
119
|
|
|
(22,374
|
)
|
|
119
|
|
|
Intercompany receivables
|
|
106
|
|
|
12,639
|
|
|
1
|
|
|
8,405
|
|
|
5,947
|
|
|
(27,098
|
)
|
|
|
|
|
Other assets
|
|
104
|
|
|
538
|
|
|
60
|
|
|
632
|
|
|
171
|
|
|
(168
|
)
|
|
1,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
9,524
|
|
|
$
|
30,553
|
|
|
$
|
7,374
|
|
|
$
|
16,440
|
|
|
$
|
27,369
|
|
|
$
|
(49,640
|
)
|
|
$
|
41,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
|
|
|
|
$
|
17,316
|
|
|
$
|
|
|
|
$
|
340
|
|
|
$
|
10,061
|
|
|
$
|
|
|
|
$
|
27,717
|
|
|
Intercompany payables
|
|
978
|
|
|
3,726
|
|
|
5,057
|
|
|
7,067
|
|
|
10,270
|
|
|
(27,098
|
)
|
|
|
|
|
Other liabilities
|
|
22
|
|
|
2,241
|
|
|
11
|
|
|
448
|
|
|
2,767
|
|
|
(168
|
)
|
|
5,321
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
1,000
|
|
|
23,283
|
|
|
5,068
|
|
|
7,855
|
|
|
23,098
|
|
|
(27,266
|
)
|
|
33,038
|
|
|
Total AerCap Holdings N.V. shareholders
'
equity
|
|
8,524
|
|
|
7,270
|
|
|
2,306
|
|
|
8,509
|
|
|
4,289
|
|
|
(22,374
|
)
|
|
8,524
|
|
|
Non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
76
|
|
|
(18
|
)
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Equity
|
|
8,524
|
|
|
7,270
|
|
|
2,306
|
|
|
8,585
|
|
|
4,271
|
|
|
(22,374
|
)
|
|
8,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
9,524
|
|
|
$
|
30,553
|
|
|
$
|
7,374
|
|
|
$
|
16,440
|
|
|
$
|
27,369
|
|
|
$
|
(49,640
|
)
|
|
$
|
41,620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-81
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
|
|
|
$
|
1,671
|
|
|
$
|
|
|
|
$
|
214
|
|
|
$
|
2,829
|
|
|
$
|
|
|
|
$
|
4,714
|
|
|
Net gain on sale of assets
|
|
|
|
|
113
|
|
|
|
|
|
20
|
|
|
96
|
|
|
|
|
|
229
|
|
|
Other income (loss)
|
|
49
|
|
|
672
|
|
|
4
|
|
|
577
|
|
|
409
|
|
|
(1,617
|
)
|
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
49
|
|
|
2,456
|
|
|
4
|
|
|
811
|
|
|
3,334
|
|
|
(1,617
|
)
|
|
5,037
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
630
|
|
|
|
|
|
87
|
|
|
1,010
|
|
|
|
|
|
1,727
|
|
|
Asset impairment
|
|
|
|
|
9
|
|
|
|
|
|
3
|
|
|
49
|
|
|
|
|
|
61
|
|
|
Interest expense
|
|
|
|
|
759
|
|
|
176
|
|
|
410
|
|
|
1,108
|
|
|
(1,341
|
)
|
|
1,112
|
|
|
Leasing expenses
|
|
|
|
|
258
|
|
|
|
|
|
30
|
|
|
250
|
|
|
|
|
|
538
|
|
|
Transaction, integration and restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
15
|
|
|
Selling, general and administrative expenses
|
|
97
|
|
|
105
|
|
|
|
|
|
135
|
|
|
287
|
|
|
(276
|
)
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
97
|
|
|
1,761
|
|
|
176
|
|
|
665
|
|
|
2,719
|
|
|
(1,617
|
)
|
|
3,801
|
|
|
(Loss) income before income taxes and income of investments accounted for under the equity method
|
|
(48
|
)
|
|
695
|
|
|
(172
|
)
|
|
146
|
|
|
615
|
|
|
|
|
|
1,236
|
|
|
Provision for income taxes
|
|
6
|
|
|
(87
|
)
|
|
21
|
|
|
(33
|
)
|
|
(72
|
)
|
|
|
|
|
(165
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income before income from subsidiaries
|
|
(42
|
)
|
|
608
|
|
|
(151
|
)
|
|
113
|
|
|
552
|
|
|
|
|
|
1,080
|
|
|
Income (loss) from subsidiaries
|
|
1,118
|
|
|
167
|
|
|
774
|
|
|
831
|
|
|
(901
|
)
|
|
(1,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,076
|
|
|
$
|
775
|
|
|
$
|
623
|
|
|
$
|
944
|
|
|
$
|
(349
|
)
|
|
$
|
(1,989
|
)
|
|
$
|
1,080
|
|
|
Net income attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
|
$
|
1,076
|
|
|
$
|
775
|
|
|
$
|
623
|
|
|
$
|
944
|
|
|
$
|
(353
|
)
|
|
$
|
(1,989
|
)
|
|
$
|
1,076
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-82
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
|
|
|
$
|
2,058
|
|
|
$
|
|
|
|
$
|
205
|
|
|
$
|
2,605
|
|
|
$
|
|
|
|
$
|
4,868
|
|
|
Net gain on sale of assets
|
|
|
|
|
33
|
|
|
|
|
|
6
|
|
|
100
|
|
|
|
|
|
139
|
|
|
Other income (loss)
|
|
6
|
|
|
653
|
|
|
|
|
|
552
|
|
|
359
|
|
|
(1,425
|
)
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
6
|
|
|
2,744
|
|
|
|
|
|
763
|
|
|
3,064
|
|
|
(1,425
|
)
|
|
5,152
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
770
|
|
|
|
|
|
72
|
|
|
949
|
|
|
|
|
|
1,791
|
|
|
Asset impairment
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
82
|
|
|
Interest expense
|
|
|
|
|
753
|
|
|
184
|
|
|
385
|
|
|
955
|
|
|
(1,185
|
)
|
|
1,092
|
|
|
Leasing expenses
|
|
|
|
|
290
|
|
|
|
|
|
27
|
|
|
266
|
|
|
|
|
|
583
|
|
|
Transaction, integration and restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
|
53
|
|
|
Selling, general and administrative expenses
|
|
60
|
|
|
120
|
|
|
1
|
|
|
102
|
|
|
308
|
|
|
(240
|
)
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
60
|
|
|
1,965
|
|
|
185
|
|
|
586
|
|
|
2,581
|
|
|
(1,425
|
)
|
|
3,952
|
|
|
(Loss) income before income taxes and income of investments accounted for under the equity method
|
|
(54
|
)
|
|
779
|
|
|
(185
|
)
|
|
177
|
|
|
483
|
|
|
|
|
|
1,200
|
|
|
Provision for income taxes
|
|
7
|
|
|
(97
|
)
|
|
23
|
|
|
(36
|
)
|
|
(70
|
)
|
|
|
|
|
(173
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income before income from subsidiaries
|
|
(47
|
)
|
|
682
|
|
|
(162
|
)
|
|
141
|
|
|
426
|
|
|
|
|
|
1,040
|
|
|
Income (loss) from subsidiaries
|
|
1,094
|
|
|
237
|
|
|
919
|
|
|
701
|
|
|
(867
|
)
|
|
(2,084
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,047
|
|
|
$
|
919
|
|
|
$
|
757
|
|
|
$
|
842
|
|
|
$
|
(441
|
)
|
|
$
|
(2,084
|
)
|
|
$
|
1,040
|
|
|
Net loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
|
$
|
1,047
|
|
|
$
|
919
|
|
|
$
|
757
|
|
|
$
|
842
|
|
|
$
|
(434
|
)
|
|
$
|
(2,084
|
)
|
|
$
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-83
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Income Statement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Revenues and other income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease revenue
|
|
$
|
|
|
|
$
|
2,355
|
|
|
$
|
|
|
|
$
|
134
|
|
|
$
|
2,503
|
|
|
$
|
|
|
|
$
|
4,992
|
|
|
Net gain on sale of assets
|
|
|
|
|
168
|
|
|
|
|
|
13
|
|
|
2
|
|
|
|
|
|
183
|
|
|
Other income (loss)
|
|
9
|
|
|
599
|
|
|
14
|
|
|
479
|
|
|
319
|
|
|
(1,307
|
)
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues and other income
|
|
9
|
|
|
3,122
|
|
|
14
|
|
|
626
|
|
|
2,824
|
|
|
(1,307
|
)
|
|
5,288
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
868
|
|
|
|
|
|
65
|
|
|
910
|
|
|
|
|
|
1,843
|
|
|
Asset impairment
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
16
|
|
|
Interest expense
|
|
12
|
|
|
780
|
|
|
164
|
|
|
359
|
|
|
735
|
|
|
(950
|
)
|
|
1,100
|
|
|
Leasing expenses
|
|
|
|
|
266
|
|
|
|
|
|
61
|
|
|
195
|
|
|
|
|
|
522
|
|
|
Transaction, integration and restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
50
|
|
|
|
|
|
59
|
|
|
Selling, general and administrative expenses
|
|
108
|
|
|
112
|
|
|
|
|
|
257
|
|
|
262
|
|
|
(357
|
)
|
|
382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Expenses
|
|
120
|
|
|
2,029
|
|
|
164
|
|
|
751
|
|
|
2,165
|
|
|
(1,307
|
)
|
|
3,922
|
|
|
(Loss) income before income taxes and income of investments accounted for under the equity method
|
|
(111
|
)
|
|
1,093
|
|
|
(150
|
)
|
|
(125
|
)
|
|
659
|
|
|
|
|
|
1,366
|
|
|
Provision for income taxes
|
|
28
|
|
|
(136
|
)
|
|
19
|
|
|
38
|
|
|
(139
|
)
|
|
|
|
|
(190
|
)
|
|
Equity in net earnings of investments accounted for under the equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income before income from subsidiaries
|
|
(83
|
)
|
|
957
|
|
|
(131
|
)
|
|
(87
|
)
|
|
521
|
|
|
|
|
|
1,177
|
|
|
Income (loss) from subsidiaries
|
|
1,262
|
|
|
104
|
|
|
1,060
|
|
|
933
|
|
|
(1,090
|
)
|
|
(2,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
1,179
|
|
|
$
|
1,061
|
|
|
$
|
929
|
|
|
$
|
846
|
|
|
$
|
(569
|
)
|
|
$
|
(2,269
|
)
|
|
$
|
1,177
|
|
|
Net loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to AerCap Holdings N.V.
|
|
$
|
1,179
|
|
|
$
|
1,061
|
|
|
$
|
929
|
|
|
$
|
846
|
|
|
$
|
(567
|
)
|
|
$
|
(2,269
|
)
|
|
$
|
1,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-84
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,076
|
|
|
$
|
775
|
|
|
$
|
623
|
|
|
$
|
944
|
|
|
$
|
(349
|
)
|
|
$
|
(1,989
|
)
|
|
$
|
1,080
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from subsidiaries
|
|
(1,118
|
)
|
|
(167
|
)
|
|
(774
|
)
|
|
(831
|
)
|
|
901
|
|
|
1,989
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
630
|
|
|
|
|
|
87
|
|
|
1,010
|
|
|
|
|
|
1,727
|
|
|
Asset impairment
|
|
|
|
|
9
|
|
|
|
|
|
3
|
|
|
49
|
|
|
|
|
|
61
|
|
|
Amortization of debt issuance costs and debt discount
|
|
|
|
|
14
|
|
|
5
|
|
|
5
|
|
|
41
|
|
|
|
|
|
65
|
|
|
Amortization of lease premium intangibles
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
10
|
|
|
|
|
|
14
|
|
|
Amortization of fair value adjustments on debt
|
|
|
|
|
(192
|
)
|
|
|
|
|
|
|
|
(3
|
)
|
|
|
|
|
(195
|
)
|
|
Accretion of fair value adjustments on deposits and maintenance liabilities
|
|
|
|
|
16
|
|
|
|
|
|
1
|
|
|
14
|
|
|
|
|
|
31
|
|
|
Maintenance rights write-off
|
|
|
|
|
282
|
|
|
|
|
|
13
|
|
|
245
|
|
|
|
|
|
540
|
|
|
Maintenance liability release to income
|
|
|
|
|
(100
|
)
|
|
|
|
|
(23
|
)
|
|
(179
|
)
|
|
|
|
|
(302
|
)
|
|
Net gain on sale of assets
|
|
|
|
|
(113
|
)
|
|
|
|
|
(20
|
)
|
|
(96
|
)
|
|
|
|
|
(229
|
)
|
|
Deferred income taxes
|
|
(7
|
)
|
|
87
|
|
|
(19
|
)
|
|
35
|
|
|
61
|
|
|
|
|
|
157
|
|
|
Restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
|
|
5
|
|
|
Other
|
|
62
|
|
|
9
|
|
|
|
|
|
45
|
|
|
5
|
|
|
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities before changes in working capital
|
|
13
|
|
|
1,254
|
|
|
(165
|
)
|
|
259
|
|
|
1,714
|
|
|
|
|
|
3,075
|
|
|
Working capital
|
|
1,143
|
|
|
(163
|
)
|
|
(272
|
)
|
|
693
|
|
|
(1,336
|
)
|
|
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
1,156
|
|
|
1,091
|
|
|
(437
|
)
|
|
952
|
|
|
378
|
|
|
|
|
|
3,140
|
|
|
Purchase of flight equipment
|
|
|
|
|
(1,685
|
)
|
|
|
|
|
(549
|
)
|
|
(1,723
|
)
|
|
|
|
|
(3,957
|
)
|
|
Proceeds from sale or disposal of assets
|
|
|
|
|
893
|
|
|
|
|
|
137
|
|
|
749
|
|
|
|
|
|
1,779
|
|
|
Prepayments on flight equipment
|
|
|
|
|
(936
|
)
|
|
|
|
|
|
|
|
(332
|
)
|
|
|
|
|
(1,268
|
)
|
|
Collections of finance and sales-type leases
|
|
|
|
|
49
|
|
|
|
|
|
33
|
|
|
10
|
|
|
|
|
|
92
|
|
|
Movement in restricted cash
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
(34
|
)
|
|
|
|
|
(35
|
)
|
|
Other
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1,715
|
)
|
|
|
|
|
(380
|
)
|
|
(1,332
|
)
|
|
|
|
|
(3,427
|
)
|
|
Issuance of debt
|
|
|
|
|
2,431
|
|
|
400
|
|
|
|
|
|
2,765
|
|
|
|
|
|
5,596
|
|
|
Repayment of debt
|
|
|
|
|
(2,400
|
)
|
|
|
|
|
(317
|
)
|
|
(1,978
|
)
|
|
|
|
|
(4,695
|
)
|
|
Debt issuance costs paid
|
|
|
|
|
(28
|
)
|
|
(13
|
)
|
|
(3
|
)
|
|
(37
|
)
|
|
|
|
|
(81
|
)
|
|
Maintenance payments received
|
|
|
|
|
251
|
|
|
|
|
|
65
|
|
|
440
|
|
|
|
|
|
756
|
|
|
Maintenance payments returned
|
|
|
|
|
(216
|
)
|
|
|
|
|
(40
|
)
|
|
(267
|
)
|
|
|
|
|
(523
|
)
|
|
Security deposits received
|
|
|
|
|
58
|
|
|
|
|
|
30
|
|
|
98
|
|
|
|
|
|
186
|
|
|
Security deposits returned
|
|
|
|
|
(79
|
)
|
|
|
|
|
(11
|
)
|
|
(98
|
)
|
|
|
|
|
(188
|
)
|
|
Repurchase of shares and tax withholdings on share-based compensation
|
|
(1,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
(1,139
|
)
|
|
17
|
|
|
387
|
|
|
(276
|
)
|
|
923
|
|
|
|
|
|
(88
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
17
|
|
|
(607
|
)
|
|
(50
|
)
|
|
296
|
|
|
(31
|
)
|
|
|
|
|
(375
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
4
|
|
|
829
|
|
|
64
|
|
|
931
|
|
|
207
|
|
|
|
|
|
2,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
21
|
|
|
$
|
222
|
|
|
$
|
14
|
|
|
$
|
1,227
|
|
|
$
|
176
|
|
|
$
|
|
|
|
$
|
1,660
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-85
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,047
|
|
|
$
|
919
|
|
|
$
|
757
|
|
|
$
|
842
|
|
|
$
|
(441
|
)
|
|
$
|
(2,084
|
)
|
|
$
|
1,040
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from subsidiaries
|
|
(1,094
|
)
|
|
(237
|
)
|
|
(919
|
)
|
|
(701
|
)
|
|
867
|
|
|
2,084
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
770
|
|
|
|
|
|
72
|
|
|
949
|
|
|
|
|
|
1,791
|
|
|
Asset impairment
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
82
|
|
|
Amortization of debt issuance costs and debt discount
|
|
|
|
|
13
|
|
|
5
|
|
|
4
|
|
|
34
|
|
|
|
|
|
56
|
|
|
Amortization of lease premium intangibles
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
20
|
|
|
Amortization of fair value adjustments on debt
|
|
|
|
|
(330
|
)
|
|
|
|
|
|
|
|
(6
|
)
|
|
|
|
|
(336
|
)
|
|
Accretion of fair value adjustments on deposits and maintenance liabilities
|
|
|
|
|
33
|
|
|
|
|
|
2
|
|
|
20
|
|
|
|
|
|
55
|
|
|
Maintenance rights write-off
|
|
|
|
|
395
|
|
|
|
|
|
22
|
|
|
235
|
|
|
|
|
|
652
|
|
|
Maintenance liability release to income
|
|
|
|
|
(206
|
)
|
|
|
|
|
(19
|
)
|
|
(196
|
)
|
|
|
|
|
(421
|
)
|
|
Net gain on sale of assets
|
|
|
|
|
(33
|
)
|
|
|
|
|
(6
|
)
|
|
(100
|
)
|
|
|
|
|
(139
|
)
|
|
Deferred income taxes
|
|
(7
|
)
|
|
98
|
|
|
(22
|
)
|
|
28
|
|
|
64
|
|
|
|
|
|
161
|
|
|
Restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
|
|
|
|
|
|
34
|
|
|
Other
|
|
63
|
|
|
13
|
|
|
|
|
|
(7
|
)
|
|
53
|
|
|
|
|
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities before changes in working capital
|
|
9
|
|
|
1,474
|
|
|
(179
|
)
|
|
237
|
|
|
1,576
|
|
|
|
|
|
3,117
|
|
|
Working capital
|
|
1,002
|
|
|
911
|
|
|
181
|
|
|
(545
|
)
|
|
(1,285
|
)
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
1,011
|
|
|
2,385
|
|
|
2
|
|
|
(308
|
)
|
|
291
|
|
|
|
|
|
3,381
|
|
|
Purchase of flight equipment
|
|
|
|
|
(594
|
)
|
|
|
|
|
(298
|
)
|
|
(2,001
|
)
|
|
|
|
|
(2,893
|
)
|
|
Proceeds from sale or disposal of assets
|
|
|
|
|
998
|
|
|
|
|
|
158
|
|
|
1,211
|
|
|
|
|
|
2,367
|
|
|
Prepayments on flight equipment
|
|
|
|
|
(937
|
)
|
|
|
|
|
(9
|
)
|
|
(1
|
)
|
|
|
|
|
(947
|
)
|
|
Collections of finance and sales-type leases
|
|
|
|
|
26
|
|
|
|
|
|
22
|
|
|
26
|
|
|
|
|
|
74
|
|
|
Movement in restricted cash
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
81
|
|
|
|
|
|
90
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(507
|
)
|
|
|
|
|
(140
|
)
|
|
(684
|
)
|
|
|
|
|
(1,331
|
)
|
|
Issuance of debt
|
|
|
|
|
1,012
|
|
|
35
|
|
|
|
|
|
2,595
|
|
|
|
|
|
3,642
|
|
|
Repayment of debt
|
|
|
|
|
(2,825
|
)
|
|
(35
|
)
|
|
(8
|
)
|
|
(2,346
|
)
|
|
|
|
|
(5,214
|
)
|
|
Debt issuance costs paid
|
|
|
|
|
(9
|
)
|
|
|
|
|
(2
|
)
|
|
(24
|
)
|
|
|
|
|
(35
|
)
|
|
Maintenance payments received
|
|
|
|
|
292
|
|
|
|
|
|
39
|
|
|
465
|
|
|
|
|
|
796
|
|
|
Maintenance payments returned
|
|
|
|
|
(234
|
)
|
|
|
|
|
(30
|
)
|
|
(241
|
)
|
|
|
|
|
(505
|
)
|
|
Security deposits received
|
|
|
|
|
57
|
|
|
|
|
|
25
|
|
|
120
|
|
|
|
|
|
202
|
|
|
Security deposits returned
|
|
|
|
|
(111
|
)
|
|
|
|
|
(10
|
)
|
|
(150
|
)
|
|
|
|
|
(271
|
)
|
|
Dividend paid to non-controlling interest holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
|
|
|
(11
|
)
|
|
Repurchase of shares and tax withholdings on share-based compensation
|
|
(1,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,021
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
(1,021
|
)
|
|
(1,818
|
)
|
|
|
|
|
14
|
|
|
408
|
|
|
|
|
|
(2,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents
|
|
(10
|
)
|
|
60
|
|
|
2
|
|
|
(434
|
)
|
|
15
|
|
|
|
|
|
(367
|
)
|
|
Effect of exchange rate changes
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
(1
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
14
|
|
|
769
|
|
|
62
|
|
|
1,366
|
|
|
192
|
|
|
|
|
|
2,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
4
|
|
|
$
|
829
|
|
|
$
|
64
|
|
|
$
|
931
|
|
|
$
|
207
|
|
|
$
|
|
|
|
$
|
2,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-86
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
AerCap
Holdings N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,179
|
|
|
$
|
1,061
|
|
|
$
|
929
|
|
|
$
|
846
|
|
|
$
|
(569
|
)
|
|
$
|
(2,269
|
)
|
|
$
|
1,177
|
|
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Income) loss from subsidiaries
|
|
(1,262
|
)
|
|
(104
|
)
|
|
(1,060
|
)
|
|
(933
|
)
|
|
1,090
|
|
|
2,269
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
868
|
|
|
|
|
|
65
|
|
|
910
|
|
|
|
|
|
1,843
|
|
|
Asset impairment
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
16
|
|
|
Amortization of debt issuance costs and debt discount
|
|
1
|
|
|
10
|
|
|
5
|
|
|
10
|
|
|
20
|
|
|
|
|
|
46
|
|
|
Amortization of lease premium intangibles
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
16
|
|
|
|
|
|
23
|
|
|
Amortization of fair value adjustments on debt
|
|
|
|
|
(435
|
)
|
|
|
|
|
|
|
|
(8
|
)
|
|
|
|
|
(443
|
)
|
|
Accretion of fair value adjustments on deposits and maintenance liabilities
|
|
|
|
|
65
|
|
|
|
|
|
1
|
|
|
10
|
|
|
|
|
|
76
|
|
|
Maintenance rights write-off
|
|
|
|
|
350
|
|
|
|
|
|
17
|
|
|
262
|
|
|
|
|
|
629
|
|
|
Maintenance liability release to income
|
|
|
|
|
(141
|
)
|
|
|
|
|
(8
|
)
|
|
(95
|
)
|
|
|
|
|
(244
|
)
|
|
Net gain on sale of assets
|
|
|
|
|
(168
|
)
|
|
|
|
|
(13
|
)
|
|
(2
|
)
|
|
|
|
|
(183
|
)
|
|
Deferred income taxes
|
|
(28
|
)
|
|
136
|
|
|
(19
|
)
|
|
(38
|
)
|
|
59
|
|
|
|
|
|
110
|
|
|
Restructuring related expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49
|
|
|
|
|
|
49
|
|
|
Other
|
|
64
|
|
|
(36
|
)
|
|
|
|
|
34
|
|
|
28
|
|
|
|
|
|
90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from operating activities before changes in working capital
|
|
(46
|
)
|
|
1,616
|
|
|
(145
|
)
|
|
(19
|
)
|
|
1,783
|
|
|
|
|
|
3,189
|
|
|
Working capital
|
|
846
|
|
|
(587
|
)
|
|
193
|
|
|
618
|
|
|
(899
|
)
|
|
|
|
|
171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
800
|
|
|
1,029
|
|
|
48
|
|
|
599
|
|
|
884
|
|
|
|
|
|
3,360
|
|
|
Purchase of flight equipment
|
|
|
|
|
(1,476
|
)
|
|
|
|
|
(299
|
)
|
|
(997
|
)
|
|
|
|
|
(2,772
|
)
|
|
Proceeds from sale or disposal of assets
|
|
|
|
|
1,083
|
|
|
|
|
|
94
|
|
|
391
|
|
|
|
|
|
1,568
|
|
|
Prepayments on flight equipment
|
|
|
|
|
(585
|
)
|
|
|
|
|
|
|
|
(207
|
)
|
|
|
|
|
(792
|
)
|
|
Collections of finance and sales-type leases
|
|
|
|
|
17
|
|
|
|
|
|
12
|
|
|
26
|
|
|
|
|
|
55
|
|
|
Movement in restricted cash
|
|
|
|
|
|
|
|
|
|
|
(11
|
)
|
|
309
|
|
|
|
|
|
298
|
|
|
Other
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1,034
|
)
|
|
|
|
|
(204
|
)
|
|
(478
|
)
|
|
|
|
|
(1,716
|
)
|
|
Issuance of debt
|
|
300
|
|
|
2,500
|
|
|
|
|
|
|
|
|
1,114
|
|
|
|
|
|
3,914
|
|
|
Repayment of debt
|
|
(300
|
)
|
|
(2,010
|
)
|
|
|
|
|
(8
|
)
|
|
(1,726
|
)
|
|
|
|
|
(4,044
|
)
|
|
Debt issuance costs paid
|
|
|
|
|
(17
|
)
|
|
|
|
|
|
|
|
(32
|
)
|
|
|
|
|
(49
|
)
|
|
Maintenance payments received
|
|
|
|
|
306
|
|
|
|
|
|
24
|
|
|
446
|
|
|
|
|
|
776
|
|
|
Maintenance payments returned
|
|
|
|
|
(244
|
)
|
|
|
|
|
(20
|
)
|
|
(294
|
)
|
|
|
|
|
(558
|
)
|
|
Security deposits received
|
|
|
|
|
97
|
|
|
|
|
|
25
|
|
|
49
|
|
|
|
|
|
171
|
|
|
Security deposits returned
|
|
|
|
|
(83
|
)
|
|
|
|
|
(47
|
)
|
|
(14
|
)
|
|
|
|
|
(144
|
)
|
|
Repurchase of shares and tax withholdings on share-based compensation
|
|
(794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(794
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
(794
|
)
|
|
549
|
|
|
|
|
|
(26
|
)
|
|
(457
|
)
|
|
|
|
|
(728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
6
|
|
|
544
|
|
|
48
|
|
|
369
|
|
|
(51
|
)
|
|
|
|
|
916
|
|
|
Effect of exchange rate changes
|
|
1
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
5
|
|
|
|
|
|
(3
|
)
|
|
Cash and cash equivalents at beginning of period
|
|
7
|
|
|
225
|
|
|
14
|
|
|
1,006
|
|
|
238
|
|
|
|
|
|
1,490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
14
|
|
|
$
|
769
|
|
|
$
|
62
|
|
|
$
|
1,366
|
|
|
$
|
192
|
|
|
$
|
|
|
|
$
|
2,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-87
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2017
|
|
|
|
AerCap
Holdings
N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,076
|
|
|
$
|
775
|
|
|
$
|
623
|
|
|
$
|
944
|
|
|
$
|
(349
|
)
|
|
$
|
(1,989
|
)
|
|
$
|
1,080
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of derivatives, net of tax
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
2
|
|
|
|
|
|
15
|
|
|
Actuarial gain on pension obligations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
3
|
|
|
|
|
|
16
|
|
|
Comprehensive income (loss)
|
|
1,076
|
|
|
775
|
|
|
623
|
|
|
957
|
|
|
(346
|
)
|
|
(1,989
|
)
|
|
1,096
|
|
|
Comprehensive income attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) attributable to AerCap Holdings N.V.
|
|
$
|
1,076
|
|
|
$
|
775
|
|
|
$
|
623
|
|
|
$
|
957
|
|
|
$
|
(350
|
)
|
|
$
|
(1,989
|
)
|
|
$
|
1,092
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-88
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
|
|
AerCap
Holdings
N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,047
|
|
|
$
|
919
|
|
|
$
|
757
|
|
|
$
|
842
|
|
|
$
|
(441
|
)
|
|
$
|
(2,084
|
)
|
|
$
|
1,040
|
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of derivatives, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
|
|
|
|
6
|
|
|
Actuarial loss on pension obligations, net of tax
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive (loss) income
|
|
|
|
|
|
|
|
|
|
|
(2
|
)
|
|
6
|
|
|
|
|
|
4
|
|
|
Comprehensive income (loss)
|
|
1,047
|
|
|
919
|
|
|
757
|
|
|
840
|
|
|
(435
|
)
|
|
(2,084
|
)
|
|
1,044
|
|
|
Comprehensive loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) attributable to AerCap Holdings N.V.
|
|
$
|
1,047
|
|
|
$
|
919
|
|
|
$
|
757
|
|
|
$
|
840
|
|
|
$
|
(428
|
)
|
|
$
|
(2,084
|
)
|
|
$
|
1,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-89
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
31. Supplemental guarantor financial information (Continued)
Condensed Consolidating Statement of Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
AerCap
Holdings
N.V.
|
|
AerCap
Global
Aviation
Trust
|
|
AerCap
Ireland
Capital
Designated
Activity
Company
|
|
Guarantors
(a)
|
|
Non-
Guarantors
|
|
Eliminations
|
|
Total
|
|
|
|
(U.S. Dollars in millions)
|
|
Net income (loss)
|
|
$
|
1,179
|
|
|
$
|
1,061
|
|
|
$
|
929
|
|
|
$
|
846
|
|
|
$
|
(569
|
)
|
|
$
|
(2,269
|
)
|
|
$
|
1,177
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in fair value of derivatives, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial loss on pension obligations, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income (loss)
|
|
1,179
|
|
|
1,061
|
|
|
929
|
|
|
846
|
|
|
(569
|
)
|
|
(2,269
|
)
|
|
1,177
|
|
|
Comprehensive loss attributable to non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) attributable to AerCap Holdings N.V
.
|
|
$
|
1,179
|
|
|
$
|
1,061
|
|
|
$
|
929
|
|
|
$
|
846
|
|
|
$
|
(567
|
)
|
|
$
|
(2,269
|
)
|
|
$
|
1,179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(a)
-
Guarantors
consist of AerCap U.S. Global Aviation LLC, AerCap Aviation Solutions B.V., AerCap Ireland Ltd. and ILFC.
F-90
Table of Contents
AerCap Holdings N.V. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
(U.S. Dollars in thousands or as otherwise stated, except share and per share data)
32. Subsequent events
In January 2018, AerCap Trust and AICDC co-issued $600 million aggregate principal amount of 3.30% senior notes due 2023 and $550 million aggregate principal amount of
3.875% senior notes due 2028. The proceeds from the offering were used for general corporate purposes.
In
February 2018, our Board of Directors approved a share repurchase program authorizing total repurchases of up to $200 million of AerCap ordinary shares through June 30,
2018. As of March 2, 2018, the dollar amount remaining under this share repurchase program was $145.7 million. Repurchases under the program may be made through open market purchases or
privately negotiated transactions in accordance with applicable U.S. federal securities laws. The timing of repurchases and the exact number of common shares to be purchased will be determined by the
Company's management, in its discretion, and will depend upon market conditions and other factors. The program will be funded using the Company's cash on hand and cash generated from operations. The
program may be suspended or discontinued at any time.
F-91
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